We've monitored data and provided syntheses in this commentary space and in MarketWatch Quarterly articles, revealing that while we do see meaningful indicators pointing toward a reprieve, we are not out of the doldrums just yet. There are many questions: Why aren't we enjoying an exciting and quickly prosperous V-shaped recovery and why still the doldrums? Will the U.S. face the dreaded L-shaped future that Japan has labored under? What of the Chinese, U.S. and EU stimulus packages, fiscal and monetary, on top of quantitative easing? What about the lower oil prices and currency movements? What about consumer confidence letting up and other variables showing stabilization. Aren't all of these things enough to push us ahead?
Two new data points are at the base of many analysts' unease. The first is the March U.S. trade deficit on goods and services, which is US$3 billion higher than the previous month (moving from $26b to $29b, February to March). The second worry is the GDP of the US and Euro-zone (EZ) are both slowing because of continued weak retail sales - consumers are saving more than spending (good for the individual person, bad for national and global economies).
Enter stimulus money, fiscal and monetary. In the U.S., the Recovery Act is set to address, in part, the reasons behind the lagging retail sales: the unemployment numbers. People are afraid of loosing or have lost their jobs. Move people back to employment stability and you can probably get them to spend some money. Win-win. But the stimulus money really hasn't hit the pavement yet in the U.S. (We'll be exploring this question in more detail an upcoming article for MarketWatch Quarterly focusing on the specific immediate and mid-term impact on the electronics industry and supply chain.) Meanwhile...
China's goal of 8% growth for 2009 might sound like someone was in a coma for the past year, but actually, they might just hit their mark. Why? They too have, what the Economist terms, ‘a massive fiscal stimulus' solution in play. Because China's economic woes stemmed more from domestic issues (only 40% of their GDP is export reliant, as opposed to a whopping 70% of the U.S. and 65% of the EZ, as compiled by FX360.com), and because of the government's ability to ‘ask' for particular types of cooperation, the impact of the stimulus money is hitting faster than elsewhere. Also, as reported in the Economist:
[...] only about 30% of the government's 4 trillion yuan ($585 billion) infrastructure package is being funded by the government. Most of the rest will be financed by bank lending, which had already soared by 30% in the 12 months to March, twice its pace last summer. JPMorgan thinks that this credit and investment boom could lift GDP growth to an annualized pace of over 10% in each of the next three quarters.
There is, of course, more to the Chinese economic puzzle, but the question of fiscal stimulus and it's impact is already being tested in the real world. The trick is in the implementation, not the intention. China's path seems to be leading out of the depths feared, will the U.S. and EZ be successful too, once the money reaches the people and projects? The prospects are good as monetary and fiscal stimulus solutions have the support of most economists, according to WSJ.com. These economists also point to 2H09 for the end to the recession but add another three to five years for full bounce back.
For the electronics industry through, until all of the numbers and economic trajectories head into sustained, positive territory, there can be no true positives and increased revenues. As The Washington Post states, based on the latest U.S. retail numbers, "Electronics and appliances stores were the hardest hit, with sales falling 2.8 percent as shoppers held off on big-ticket purchases." Friday's Consumer Price Index (CPI) should give us another means to gauge what the retail numbers really mean and how soon we'll be on the '09 recovery path.
UPDATE: The CPI numbers are in and the news is as economists predicted and hoped, stability reigned last month which is good. As Reuters summed things up this morning, looks like we are in a pre-recovery. Finally, some good news on a Friday!