It was a funny day yesterday.
It was a day when good news vied with bad to dominate the economic climate.
This article focuses on the latest reasons for hope to have emerged yesterday. In the next two articles below the focus is on the worrying data.
Let’s begin with the good.
Some really encouraging signs came out of Japan. It really does seem possible that after suffering an especially poor previous two quarters, the economy of the Rising Sun is close to recovery.
There was also a hint of cheer to come out of the Eurozone. And finally, back home, a report from KPMG suggested that a light has appeared at the end of the gloomy High Street tunnel.
The news from Japan really was encouraging. Data out yesterday indicated that Japanese industrial output rose by 1.6 per cent in March. You need to see this rise in the context of what happened before. During the previous two months, output contracted by a simply dreadful 10.1 per cent. But then again, the Japanese Government has forecast a 4.3 per cent expansion this month (April) and reckons May will see an impressive 6.1 per cent growth rate. The Japanese Purchasing Managers Index has risen sharply too, from 33.8 in March to 41.4 for April.
So far, Japan has been hit especially badly. The Japanese Government has predicted an annual contraction of 3.3 per cent in the financial year which began last month. Japan languished at the bottom in the IMF league of expected economic performance for this year. But it seems that just as the Japanese slump peaks, the seeds for recovery have been laid.
Meanwhile, in the Eurozone, the Economic Sentiment Index rose from a record low last month of 64.7, to 67.2. The index had fallen for the previous ten months.
Economic sentiment is still low. The recent score is compatible with annual contraction of around 2 per cent. Indices for France, Germany and Italy suggest contractions of 1.5, 3.5 and 4.5 per cent respectively. But the point is that it is an improvement. Before you can have recovery, you need the pace at which things get worse to slow down. It appears we are now at that stage.
Finally, KPMG has gone bullish. It produces what it calls a Retail Heath Indicator, which is supposed to give a foretaste of things to come on the High Street. KPMG said: “The state of health of UK retail, whilst still declining, was now declining at a slower rate.” So, in a way, it is the same story we saw above on Japan and the Eurozone. Sure, things are bad, but at least there is a sign that the rate of decline is slowing. So where does that hint of optimism come from?
KPMG talked about retailers continuing “to benefit from reduced pressure on rents, stabilising energy costs, staff rationalisation programmes, a new anti-bonus/anti-sales-commission culture and other cost-cutting measures.”
All in all, then, yesterday hardly gave reasons to go out and cheer. But at least we saw hints that the crisis won’t just go on forever, and that recovery will follow, just as day follows night. To continue with the day and night analogy, it would seem we have now passed midnight.
© Investment & Business News 2013