Do experts’ opinions and statistics coincide on the question about the end of the global economic crisis?

These days people are constantly saying that the global economic crisis is over. According to Paul Krugman, a Nobel-prize winner, one cannot say that there is some global economic recovery in the world, as many experts do. The statistic data provided by numerous countries do not allow us to say it. Czech analysts give their own way to define whether economic situation is really getting better. They suggest doing it with the help of 8 simple indicators.

The 1st and major indicator is employment. Without it any economy is, at best, in the state close to the absence of development. When there is no opportunity to find a job it says that the economy is suffering a severe crisis. Unemployment leads to a range of social problems. It is such a heavy problem that unemployment rate comes to an acceptable level only at the very end of economic recovery through the society’s incredible efforts.

The United States, which stated the global economic crisis, proves that the unemployment phenomenon is extremely difficult to struggle with. The US unemployment rate is some 9.6%. Obama’s administration has failed to reduce it even a little bit in spite of allocating billions of dollars for that reason. Paul Krugman gives the following comparison of economic growth and unemployment rate decline: economic growth of 2.5% gives an opportunity only to restrain unemployment; far bigger pace of economic growth is needed to reduce it.
The US economic indicators for the 1st quarter grew 2.5%, which gave an opportunity to stop the unemployment growth. But now the indicators fell down to 1.6%.
The economic data for the EU do not afford ground for positive rating. The total unemployment in the EU is 9.6%. The GDP growth of the EU
slightly exceeds the one of the US only at the expense of German export, which doesn’t affect the common situation in the employment sector.

The 2nd indicator is lively rivalry between companies and their mergence. Deloitte analysts believe that currently there are very favorable conditions for such actions. The shares of many companies are relatively cheap. However, according to the data provided by Allen & Overy, there is practically no merging activity. Jan Prochaska, an analyst of Cyrrus, thinks that this indicator of growth is secondary.

The 3rd indicator showing economic recovery is a price increase at real estate markets. Alix Mihel, an analyst of Raiffeisen Bank, considers this indicator to be anticipatory, showing the beginning of economic ups and downs in advance. The data provided by Federal Housing Finance Agency, say that the housing sector is far from recovering. The values are still lower than a year ago in spite of the fact that the dependency on mortgage has been reduced. Real estate property prices have decreased, which resulted in the owners losing their money and led to some specific difficulties in the sector. Only the stable 3-5% growth of real estate prices within the next few years will testify to the end of the crisis.

The 4th indicator is the capital-market stabilization. The financial instruments, traded at exchange markets, and investors’ sentiments are very significant indicators of economic health. The market-of-shares collapse led to panic among the owners of spare capital, who are currently looking for opportunities to save their money through investing it in any assets, except the real sector of economy. Exchange markets are more sensitive about pre-crisis symptoms in the economy. That is why the crisis itself appears at the markets earlier than in the real sector of economy. The marketplaces will probably be able to show the end of the crisis only when the prices stop reacting with hectic moves to insignificant negative data. Dow Jones index very often crosses the 10.000 level. Only the stabilization above the level will indicate the positive dynamics in the US economy.

The 5th indicator is credit availability. During any crisis it is difficult to find spare money. Everybody knows it. Bankers are not inclined to lend even if the borrowers have creditability proofs.
The Czech economic chamber announced lending reduction for the 1st quarter by 116 billion krones. Jan Prochaska says that weak company-merger activities are caused by the reluctance of the banking sector to finance them.

The 6th indicator is the growth of importance of the real economic sector. The industrial sector is the basis of any economic system. Industry influences all other economic sectors even despite the fact that the global industry produces only 30% of the global GDP. The leading industrial indicator is capacity utilization. 75-80% is an optimal figure. Everything above it testifies to economic overheating. Everything below it says about economic stagnation. Currently this is one of the few activities indicating positive sides of the US economy: the capacity utilization is 74%.

The 7th indicator, which is a very significant one, is the citizens’ buying power and willingness to spend money. When the economy of some country recovers its people feel more confident about the future and income, so they start spending their savings more willingly and actively. The August data on the US and EU’s most capacious consumer markets showed a 3.1% increase, which is a fairly positives sign.

The 8th indicator is traffic growth. The Intensive traffic on transit highways may testify to an increase in cargo transportation and, consequently, to positive tendencies in the economy and trading. The workload of the transportation sector can be used as an anticipatory indicator of the forthcoming economic growth.

Czech economists and analysts note that these indicators may sometimes fail to anticipate the economic future. Yet they do not always simultaneously do it. The global economy entered a new stage of development. There are still many difficulties to face in the future. It is probable that we will never see the economy as developed as we saw it for the last 10 years before the crisis.
The Info-Analytic Service of Masterforex-V Academy offers you to conduct a detailed analysis of the economic situation in your home country on the basis of these 8 indicators, to share the results and discuss them at a special topic of the MF-V Academy forum.
What favors the growth or decrease of the economic indicators in your country? Do you think the global economic crisis is over? How many years will it take for the economies of the USA, Europe, Canada and other countries to recover?

This article is from: Market Leader
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