Weekly international investment round up to November 3, 2009
Based upon the latest data showing the US economy grew by 3.5 per cent during the last quarter all of the world’s top five economies have now pulled out of recession. By experiencing this quarter of positive growth, not seen since the second quarter of 2008, America has technically ended their worst economic contraction since the Great Depression and now joins Japan, China, Germany and France in doing so although the dark cloud of rising unemployment still weighs heavy.
Significantly for America which is still officially the world’s largest economy the figures released by their Commerce Department show they enjoyed good growth over many sectors between July and September. For example, consumer spending which accounts for around 70 per cent of their economy jumped by 3.8 per cent in the third quarter while on the back of the cheaper dollar American exporters saw their goods increase by an annualized rate of 21.4 per cent, data not been seen for well over a decade.
Even before President Barack Obama had been inaugurated I had expressed my personal belief that the United States would exit the recession by this year’s end. In truth, this was more based upon knowing America would do something rather than the exact knowledge of what they would do! But when the American’s do something they generally do it big! Without doubt the two biggest factors which have contributed to achieving this latest positive quarter of growth and has dragged the country out of the darkness was their massive, unprecedented multi-billion dollar stimulus package together with their consumer friendly ‘cash-for-clunkers’ car replacement scheme.
The mind-boggling use of the word ‘billion’ has taken on a new dimension this year which has somehow seen it lose most of its meaning due to so many dollars of them being used just to get the economic wheels turning again and even when trying to conceptualize this word by considering that a billion minutes ago Jesus was alive it is still difficult to understand its colossal nature however, it was only ever going to be a matter of time before the ripple effect of such a huge government spending program as that instigated by Obama administration would have an effect but just as the question may be asked of the athlete who turns to steroids to enhance his performance what will happen when the injections stop? US Government spending rose at the rate of 7.9 per cent during the third quarter and this is in addition to the 11.4 per cent which was spent in the previous period, quite simply this kind of spending can not continue indefinitely.
While the top five may indeed be breathing again number six, the UK, is still left gasping for air as it unexpectedly suffered a third quarter drop of 0.4 per cent in GDP and while British house prices may be showing signs of recovery the country’s consumer still have their wallets firmly shut.
Although soon brave investor’s will no doubt be encouraged to prospect for nuggets such as Ford. Although its sector may currently be unfashionable Ford’s climb from a top five player into the top two now seems most possible.
Mark Lamb is Head of the Life Dept. at Citadel Insurance plc which is authorised to carry on general and long term business of insurance under the Insurance Business Act, 1998 and is regulated by the MFSA. Contact by email: firstname.lastname@example.org Tel; 25579000. Website: www.citadelplc.com
This article does not intend to give investment advice and its contents should not be construed as such. Information in this article has been obtained from various public sources and is given by way of information only. Readers are always encouraged to seek financial advice before making any investment decision.