After the positive data from the Netherlands and Germany, there is a possibility that tomorrow the IMF will present a positive picture of the world economy. “You see it improving in many countries,” says BNR in-house economist Han de Jong.
Statistics Netherlands data released this morning shows that producer confidence in the Netherlands has increased slightly, mainly because business owners are more optimistic about expected activity over the next three months.
Manufacturer confidence in Germany has also improved. This is due to a less negative attitude towards future business and a more positive attitude towards the current business situation. The average daily output of German industry also increased.
Good indicator
The fact that entrepreneurs are more confident is a good indicator of the short-term development of the economy as a whole. And that image is widely visible, says De Jong. “You see it improving in many countries, both in the EU and in the US.” German data shows that expectations are good. “And I don’t expect the IMF to be much more pessimistic.”
The growing positivity is mainly due to falling energy prices, thinks De Jong. ‘We could not have predicted it, but in August the price of gas in Europe was still 340 euros per megawatt hour and now it is 55 euros. The price of oil has also dropped.
In addition, decreasing problems in the supply chain play a role. The shortage of chips in the automotive industry is decreasing, which means that car production is restarting. “This is important for Germany and therefore also for us,” says De Jong.
Finally, we must also look at China. ‘The confinement they are ready and the prospect is that the economy can run at full capacity. And this is an important growth engine for the whole world’
yield curve
But that doesn’t mean there aren’t more signs that a recession is imminent. For example, the short-term interest rate is still higher than the long-term interest rate, the so-called inverted yield curve. “For the past 50 years, this has been a reliable sign of an approaching recession. You don’t know for sure, but this remains on the radar,’ says De Jong.
It is also unclear whether energy prices will stay this low and both the Fed and ECB will announce new interest rate decisions this week. “Interest rates will no doubt go up again and it won’t be the first time central banks themselves have pushed the economy into recession.”
And that consumer confidence may even be even more fragile than you think. The sector can be divided into three categories, says De Jong. ‘In energy-intensive industry, production has fallen sharply, but now it can start to rise again. The group of companies that have benefited a lot from the pandemic, such as pharmaceuticals and technology, cannot sustain this strong growth. And the group of companies that have been particularly hard hit by the pandemic, such as the automotive industry, can now benefit from the recovery. These are three very different types of companies and this makes the situation unpredictable.’
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
