Has the fog of uncertainty led the West off the road to economic redemption? As dissenting voices within the ranks of economic experts threaten to drown out the optimism of early 2010, just-drinks takes a closer look at the mood in Western countries.
Ireland, which has the dubious honour of being the first EU country to fall into recession in 2008, has this week posted another decline in gross domestic product for its latest quarter. Its economy shrank by 1.2% in the second quarter of 2010, unleashing a shockwave that has left the phrase “double-dip” reverberating in the ears of Europe’s governments.
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The New York Times called the idea that Ireland might slide back into recession a “daunting prospect”. While several commentators pointed out that it was too early to call, some pointed out that a prolonged slump in one Eurozone country could still bring down the rest “in a domino effect”.
Ireland’s travails exacerbated existing concerns about economic progress in the rest of Europe. Manufacturing output in the Eurozone fell to a seven-month low in September, according to a report released yesterday (23 September) by Markit Economic Research.
Markit’s chief economist, Chris Williamson, told the BBC: “[The Markit survey data suggests] Spain and Italy – big countries that we need to get some momentum going in the recovery – may be running out of steam and… are also at risk of falling into a double dip recession.” He added that Greece’s well-publicised recession was “deepening”.
In the UK, newspapers this week were awash with reports that the Bank of England may have to start printing more money to paper over continuing cracks in the national economy. “The probability that further action would become necessary to stimulate the economy and keep inflation on track to hit the target in the medium term had increased,” said the Bank’s Monteary Policy Committee, as reported by the Guardian.
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By GlobalDataAnalysts at BNP Paribas, quoted in the Wall Street Journal, said that the latest figures on Europe were a “dose of reality”. The Eurozone region, in particular, was not decoupled from events elsewhere – and particularly events across the Atlantic.
This brings us neatly over to the US. It officially exited recession in the summer of 2009 but has lurched haphazardly, rather than strived, towards recovery. Unemployment remains near the 10% mark and the Washington Post summed up the prevailing mood this week when it led with the notion that “for many of us, the recession lives on”.
For drinks companies keen to see more money in consumer’s wallets, this could be a worrying trend. The US poverty rate in 2009 was the highest since 1994, reported the Washington Post, citing Census Bureau figures. “The question should also be: Are we accurately portraying the health of the economy and how individuals and families feel about their personal finances?” wrote the Post’s Michelle Singletary.
Billionaire US investor Warren Buffett, who has witnessed the odd downturn in his time, announced yesterday that he believes the US to be “still in recession”. However, with a dose of American optimism, he added: “We’re not gonna be out of it for a while, but we will get out.”
In short, then, Western economies remain more fragile than perhaps was imagined at the beginning of the year and consumers’ day-to-day finances are under pressure. It was never likely to be a waltz down the yellow brick road to recovery. In fact, there are probably a few more nasty surprises up ahead.
