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JULY 2009 T h e O n l i n e E x e c u t i v e N e w s f o r C o r p o r a t e L e a d e r s p6 Global economic index rises for first time since 2007 By International Chamber of Commerce (ICC) > The world economic climate index rose in the second quarter of the year for the first time since 2007 as a result of more favourable expectations for the coming six months, but the assessment of the current economic situation worsened yet again, falling to a new record low, ICC and the Ifo Institute for Economic Research said in their latest survey. > The rise in favourable expectations put the climate indicator at 64.4 points compared with 50.1 points in January. Nevertheless the indicator remains well below its long term average of 96.4 points between 1991 and 2008. > “The improvement of the climate indicator is exclusively the result of more favourable ecoAnomic expectations for the coming six months,” the report said. “The assessments of the current economic situation, in contrast, have worsened further.” > The report, based on a survey of 1,040 economic experts in 90 countries, sought to dampen optimism that the current global recession was nearing an end by emphasizing that “the difficulty of fore- casting the future scenario of the world economy is unprecedented as the financial sector is still fragile.” > But it said that the current pattern signals the slump may bottom out in the second half of the year. “However, the economic recovery is likely to only gradually gain momentum in 2009,” the report cautioned. > ICC Secretary General Guy Sebban said the report gave him reason for cautious optimism. “After months of very depressing news we are finally seeing some signs of hope,” he said. “The outlook for the next six months is positive for most areas of the world, including the United States and Europe.” > Economic expectations for the next six months improved in all major regions, especially in North America and Asia. At the same time, the worst appraisals regarding the current situation came from North America and Western Europe. > The report said that while the recession in the United States appears to be bot- toming out and could start a recovery in the second half of the year, high unemployment and large public deficits will most likely remain an urgent problem throughout 2009. > The report added that the global recession has hit the euro area harder than the United States because most countries that use the European currency are more dependent on exports for growth than is the United States. > The report, issued quarterly, said the credit crunch and economic slowdown in Western Europe have strongly hit Central and Eastern Europe, bringing Hungary and Latvia to the brink of bankruptcy. > It said economic expectations had been upgraded for all Asian countries except Indonesia and Bangladesh. In Latin America economic expectations were upgraded for all countries except Trinidad and Tobago, Uruguay, Bolivia, Costa Rica, Ecuador and El Salvador. > Economic expectations for Russia were upgraded significantly since the January Executive Newswire report. But the economic climate deteriorated further in Australia and New Zealand. The climate indicator remained negative for South Africa, the continent’s largest economy. > The economic experts surveyed said they expected a global inflation rate of 2.7% in 2009 compared with 5.4% last year. Inflation is expected to drop further during the next six months. > “However, despite the clear disinflation trend which is prevailing in the majority of countries worldwide, there are hardly any signs for a deflationary danger, possibly with the exception of Japan, where a decline of consumer price inflation of almost half a percentage point is expected on average of 2009,” the report said. > Despite the slowdown in inflation, the economic experts surveyed said they expected a further decline in short-term interest rates, but forecast the decline of long-term interest rates to end later this year, as has been the case with improved economic expectations in the past.
S T A N T O N C H A S E I N T E R N A T I O N A L End of Global Recession ISSUE 2 Economists say the US economy will be growing again by next year and lead the way to global recovery. The end of the recession is in sight, and will be led by the recovery in the US and China, followed by Europe, leading economists forecast during the World Retail Congress. > Speaking at this Congress, Mirae Asset chief global and Asia strategist Ajay Kapur forecast that the recession would end in the US in the next “few months”, followed by China. > Deloitte director of global research Dr Ira Kalish said that recovery is “all about the US and China”, which have shared a “symbiotic relationship” over the past decade. “By the end of the year or early next year, we will see the US economy growing again”, said Kalish. He added that as a result of the downturn the US will shift from consumer spending to exports, investments and government spending, whereas Asia will shift away from exports towards consumer spending. Kalish praised countries that had taken strong policy measures including quantitative easing to boost confidence, and criticized Europe’s “insufficient” policy response to the crisis and lack of strong fiscal stimulus. comment by Dr Ira Kalish, director of consumer business, Deloitte Research Retail Week, Issue 2, World Retail Congress, May 2009 > Meanwhile, Li & Fung managing director Dr William Fung warned against repeating history and creating trade barriers – a method employed in the depression of the late 1920s. He said: “The only silver lining I see is we are now operating on unprecedented lower levels of inventory and trading will be sharper. What my customers are telling me is keep inventories low, let’s chase business and have a quick response.” He said that a consensus was forming, given the resultant imbalance of power in favour of buyer over seller, that the idea of payment within 30 days on open account is “very prevalent”. However, “once you go past 60 days you are giving the retailer working capital to finance the product” leading to a lack of credit in the supply chain, he added. Fung also said he expected prices to decrease by between 5 and 10 per cent as commodity prices continue to fall. Light at the end of the tunnel In the first few months of 2009, the financial crisis that began with the collapse of the US housing market has deepened and become a truly global recession.Economic activity in the US, Europe and Japan has declined at an alarming rate. Emerging countries have experienced sharp drops in economic activity. Even the BRIC economies, which at one time seemed relatively immune to the global financial situation, have experienced serious problems. Global trade has plummeted, causing concern that the increasingly global nature of the economy leads to more rapid transmission of trouble than in the past. And yet, there are indications of light at the end of the tunnel. Global shipping rates have stabilized, risk spreads are far below their level of a few months ago, and governments have been pumping money into the system at an unprecedented rate. In the US, housing turnover and refinancing are accelerating, setting the stage for a rebound in consumer spending. In China, a massive fiscal stimulus is fuelling an investment boom while consumer spending remains surprisingly strong. What, then, can be reasonably expected in the next year and beyond? (from the Retail Week, Issue 2, of the World Retail Congress, May 2009) p7 >Toys R Us chairman and chief executive Jerry Storch said that the “essential” rule by which retailer should trade through the downturn was “know thyself”. “We don’t know how long the recession will last,” he said. “We need to get back to the basics and get back to common sense.” He added that he had seen a “change to cheap” at the expense of quality and warned against short-termist responses. >Etam chief executive Richard Simonin said that the beginning of the end of the “average customer” had begun before the global downturn but that recessionary factors had sped up the evolution. He said that it was essential for retails to know their customer and be honest with their teams. A likely scenario is that the US will experience a revival of growth by the end of this year. China, which will not experience a recession but merely a slowdown, will rebound by late 2009. These two countries can then lead the world out of recession. Europe and Japan will rely on renewed US and Chinese demand for their own recoveries. As the global economy recovers, oil and other commodity prices will rise, thereby allowing commodity dependent countries such as Russia to recover as well.This is merely a likely scenario, not a firm forecast on which to bet the farm. Still, the business cycle has not been repealed and recovery at some point in time is a near certainty. Moreover, although this is the deepest global downturn since the Great Depression of the 1930s, policymakers are reacting far differently than their predecessors of 80 years ago. Policy-makers in the US, UK and China have been aggressive in boosting demand. Thus, there is some cause for optimism. When the global economy recovers, retailers will face a new world. The US will no longer be the engine of global consumer spending growth. Americans will save more and borrow less. Their spending will be constrained by their incomes – a novel concept of late. Instead, US growth will come disproportionately from exports, investment and government. Meanwhile, Asian growth will shift away from export dependence toward growth based on domestic demand. For the world’s leading retails and their suppliers, a disproportionate share of future growth will come from the East. For retails in the US, UK, Sanin and other countries recovering from housing bubbles, growth will come from gaining market share rather than riding a consumer spending boom.
Page 1 and 2: JULY 2009 The Online Executive News
Page 3 and 4: By Wassin Karkabi S T A N T O N C H
Page 5: By Nicolas Dietz Saudi Arabia, the
Page 9 and 10: p1 By Juan D. Morales The logistics
Page 11 and 12: p1 Top20 S T A N T O N C H A S E I

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