Showing posts with label Economy. Show all posts
Showing posts with label Economy. Show all posts

Thursday, 10 September 2009

Recession - Pick your Shape


Is the recession over? There has been a great deal of discussion lately about "coming out of recession" with sides being taken on the basis of (a) whether the recession is ending and (b) what shape it is or has been.

The BBC have an interesting time line on their web site today which shows the DOW and FTSE100 since 2007 (click on the graphic above to see a larger version or click here to go to the BBC's interactive version). The "shape" discussions have been may and various - I use Nouriel Roubini (I've put a link to one version of his opinion - there are many), Dan Hamilton and Lord Mandleson. They talk about a "double dip" recession - where the current upturn is the middle of the "W" shape. Other analysts see different shapes and have different views of where the economy is going. There are "U" shape economists, "V" shape economists and the those of the "it's all rather complicated and I'd prefer not to make a prediction" school (who are possibly the most sensible).

Looking at the picture above, I can see a W - but then I can see a "V" and and "U" as well. Given how much the markets can be dominated by sentiment and by confidence, I think that we would all be sensible to see a cautious recovery in place. The important thing is not the shape of the recession - it is in understanding and taking responsibility for the causes of the recession. As a group of economies, all countries should try to learn the lessons of the past and make sure that this type of recession doesn't happen again, and that we are in reasonable shape to survive a different kind of future recession, as Alan Greenspan precdicts.

Think positive - it not only helps you, but it might just help the economic recovery.

Tuesday, 28 April 2009

News, information, data and decisions

I have been looking with interest at the way that the various news agencies have been reporting the Mexican flu outbreak. Let me give you a few examples:

The deadly swine flu virus can no longer be contained, says a WHO official, as the health agency raises its alert level - from the BBC's UK News main page, Tuesday 28/04/09

The first British victims of swine flu were named today as Scottish newlyweds Iain and Dawn Askham, from Falkirk. They flew back from Cancun in Mexico last week. - Daily Mail, 28/04/09

World Health Organisation raises threat level posed by disease to unprecedented 4 as the first cases emerge in Britain - The Times, 28/09/09

First UK swine flu cases confirmed. Pandemic worries dent stock markets - Financial Times, 28/04/09

From reading these headlines - and I have deliberately only taken the headlines at the moment, it would appear that we could all well be at danger from a pandemic the size of that in 1918 which killed tens of millions.

Those were the news agencies - now let's try to dig a little deeper. Actually it's not hard. A more careful read of the items above does give a slightly different picture:

Two quotes from today's FT - Professor Neil Ferguson, a member of the WHO’s pandemic influenza taskforce, said 40 per cent of the UK population could eventually be infected if the country was hit by a pandemic.

Prof Ferguson, of London’s Imperial College, said cases were likely to die down within a matter of weeks because the UK was moving out of the normal season for flu infection, but there was a risk that the disease would flare up again once the summer was over.

He told the BBC Radio 4 Today programme the 152 deaths in Mexico probably made up a relatively small proportion of the total number infected, who might run into tens or hundreds of thousands.

“So-called bird flu - H5N1 - was a much more dangerous virus,’’ he said. “We are not in the same ballpark. But we can’t at the moment answer the question ’Is it comparable to 1918 Spanish flu, which killed a lot of people, or is it much more like Hong Kong flu?’.’’

and...

Alan Johnson, health secretary, said the UK had “established a stockpile of enough anti-viral drugs to treat more than 33m people,” or more than half the population.

I'm not sure what the opposite of alarmist is, but that would describe me. Thirty-two million people in the UK? I believe there are two reported cases at present, both of whom were in the affected area in Mexico and both of whom are responding well to treatment. That sounds a lot less alarming than describing people responding to drugs as "victims" which, perhaps only to me, implies death.

I decided to go to the source - the World Heath Organisations site. I was concerned about the threat level referred to in the "Times" and wanted to understand the scales used. I found this great graphic (see here):

Now, level 4 does look a little scary. The full text of the release from the WHO, however, stressed that the move to phase 5 was as likely as a return to phase 3 or below. The important thing I learnt from a short period of research is this: it is too early to state the extent of the outbreak.

It is a modern malaise that information is demanded so quickly. Compare the news of a flu outbreak with the on-going story of the recession. "A flu outbreak - my God. It could be pandemic. Is it pandemic - is it, is it?" we demand of scientist through our media, just as we did (and continue to do) regarding the recession "Is it worse. It's over, isn't it. House prices have gone up - we're all safe. The recession will just get worse" and so on and on. I'll repeat - it is too early to say. Both about a possible pandemic and the recession. One of the main drivers is the negative question. No credible scientist of any flavour can respond to the question "So - will you confirm that this is not a pandemic?" with anything other than a bland answer. No-one would ever say "yes" to that question because it is too early to know. Everyone knows it is too early, and yet we continue to ask. Journalists and reporters will even preface their questions with "It will be too early to say, but..."

This demand for early information and early action can be seen in business too. I spoke with a client the other day and, over a very pleasant lunch, discussed the recession and actions his firm could take. Over a particularly fine glass of wine, I explained my theory about the dangers of precipitate action and the need for good information. He generally agreed with me and then laughed and said "But you couldn't say that - either as a consultant or a CEO". I know what he meant. Organisations generally call on consultants for action and advice (or to take the blame for decisions, but that may be a different entry) and so advice consisting of "do nothing too serious yet and let's get more and better information" is unlikely to go down too well.

It is important to remember, however, that a decision based on quality information will be a quality decision. I acknowledge that one can never have perfect data and that most business decisions have to be made with a deadline in mind. Wait where possible is my message of the day.

Tuesday, 17 February 2009

Positive Economic News

Carrying on from my post earlier today, I googled (or should that be "Googled" with a capital, I'm not sure) "Positive Ecomonic News".

The first thing to notice was that there were 279,000 results. Well that has to be good, surely? I then started to follow some of the links. The first result to catch my eye was Hexus Channel which had the wonderful idea of a slow-down in "crappy economic news", which I liked. The article discussed three indicators - the DRAM eXchange, the Halifax house-price index, and the Baltic Dry index. I'm enough of an economic nerd to have been aware of the first two, but must admit to having missed the Baltic Dry. The general tenor of the article was that there were three indicators suggesting that, at the very least, the slow-down had itself slowed - and that it might be possible that things are improving.

The FT reported good news - that UK inflation had dropped to 3%. OK, it had only dropped from 3.1.%, but it was nevertheless down. That's a good thing too - although I will admit it may be more of an indicator that the supply of money is still too tight.

There is good news out there. Try it yourself - and keep thinking positively.

Positive Mental Attitude

I hope that these posts will become a useful source of information (and occasional inspiration). While I'm setting the systems up - how about a starting thought?

Is it really all that bad?

I know that new news each day seems to be full of doom and gloom, but it can't all be bad, surely? There was good new last week in the FT (see http://www.ft.com/cms/s/0/7caf2c14-fa23-11dd-9daa-000077b07658.htmlLong), but, my goodness, you had to search for it. Is this fondness for bad news a self-fulfilling prophesy? As I understand it, one of the best drivers of recovery is confidence. So come on - let's all start to have a more positive (if careful) attitude. It might help.