Despite the dollops of enthusiasm and encouragement handed out by politicians, particularly from the United States, the world’s economy is still struggling.
Company reports from such stalwarts as Caterpillar Tractor, a leading factor in the manufacturing industry, are emblematic of the problems facing us.
These make analysts nervous about the woes. Recent data shows this graphically with big job cuts by General Electric, several steel producers and Bombardier.
Production fell in France, even in Germany and, perhaps most significantly, in China.
In the United States production was slightly higher, reflecting continuing strength in the automobile sector. How long that can last is problematic as car companies are offering interest-free for seven years, the life of many vehicles, and require no down payment.
The mining industry worldwide has been in the deepest slump in 30 years.
The sluggish nature of the economy has taken a toll on manufacturers and their employment rolls. Shipping data reveals the lack of good news in other parts of the globe. The service sector, which usually reflects the economic trends, is expanding very slowly.
Here in Canada the Liberal government is planning on infrastructure spending to help our economy. However, this generally requires more than a year to put in place and to start functioning. Deficit spending may provide a temporary respite but history shows that it often replaces activities that would normally have taken place.
It is worrying that the former governor of the Bank of England, Mervyn King, stated the world is running out of options to jump-start the economy. He therefore is very positive on the outlook for gold. In his book The End of Alchemy, he explains that this industry should thrive, following the many-year correction.
The financial crisis of the previous decade was ameliorated by extraordinary measures that have led to great distortions, for example in the housing sector.
Clearly, as a recent article in The Economist stated, “A vital part of the economy is beset by weakness.”
That will take time to repair and to make the necessary adjustments to consumer indebtedness and the grossly over-valued housing industry.