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Is the Recession Really Over?

Is the Recession Really Over?

FROM THE NEW YORK TIMES

 The Worldwide recession appears to be ending, according to surveys showing manufacturing activity is on the rise nearly every where. ” It is the emerging markets that are leading, with the U.S. following and Europe lagging, writes Chris Williamson, the chief economist of Markit, a company that surveys manufacturers in many countries.

The surveys, conducted in the United States by the Institute of Supply Management and in other countries by Markit, measure not the level of manufacturing output, but the way it is changing. The surveys have a reputation for showing turns in the economy,often before other indicators do.
The September figures for manufacturing seem to indicate that what had looked like a rapid recovery is slowing in the United States and Europe.

Similar surveys of service companies appear to show growth accelerating in most countries, although not in the three European economies mentioned previously, that Mr.Williamson thinks are still in recession:

The survey asks companies if their business is doing better or worse than in the previous month, with the three most important questions relating to new orders, production and employment. The index is set that 50 indicates business is unchanged from the previous month, while figures above that indicate growth and figures below show a decline. The higher the index, the more pervasive are reports of decline.

While details vary, the slump was sharp in nearly every country, reflecting the sudden decline that came after Lehman Brothers collapsed in September 2008. That worsened a credit squeeze, which meant some companies had no choice but to cut back on everything they could, from inventories to marketing. Others, fearing that the economic outlook could become much worse, cut back voluntarily.

It now appears that some companies cut more than necesary, and the surveys of manufacturing show that companies are expanding in most countries.

 Over all, the surveys indicate that the manufacturing sectors of China, Taiwan, South Korea and India had begun to grow by April, but that the United States did not follow suit until August.

In Europe, France is reporting growth, and Britain is hovering near midpoint, indicating the detoriation has stopped but growth has not begun yet. Although the German goverment estimates that its gross domestic product rose in the second quarter, the manufacturing survey indicates continued weakness in that country.

New orders and production have turned positive everywhere except in the three European Countries, Spain,Ireland and Italy. Spain and Ireland have been badly hurt by collapses in real estate markets, which had boomed, mostly because of easy credit. Mr.Williamson attributed some of Italy’s problems to a lack of confidence in its goverment’s ability to deal with the problems.

Employment continues to lag in most countries outside of Asia. Mr Williamson said he estimated that total job losses in the major developed countries – the United States, Britain, Europe and Japan – bottomed out at 1.9 million a month in March and are now about 500,000 a month. Onto a good note – last but not least – while many companies are still hesitant to hire, he says he thinks employment will begin to grow by the end of this year.