Mexico's GDP contracted 8.2% (year over year) in the first quarter. On an annualized basis, that 21.5% -- ouch. The bloodbath was pretty much across the board in the tertiary sector and manufacturing. The worst in each sector were commerce, which contracted 17.2%, and the manufacture of transportation equipment contracted 38.3%.
The second quarter will be about as bad as the first. Things should look better in the second half of the year, in the sense that the contraction won't be as steep.
Wednesday, May 20, 2009
Tuesday, May 19, 2009
CEOs: the recipe for success
“Which C.E.O. Characteristics and Abilities Matter?”is the subject of a study by Steven Kaplan, Mark Klebanov and Morten Sorensen. Their conclusion: execution and organizational skills make a CEO successful. Attention to detail, persistence, efficiency, analytic thoroughness and the ability to work long hours mattered more than being good at listening and building teams, or being an enthusiastic colleague and a great communicator.
For a summary of the findings, see:
http://www.nytimes.com/2009/05/19/opinion/19brooks.html?th&emc=th
For a summary of the findings, see:
http://www.nytimes.com/2009/05/19/opinion/19brooks.html?th&emc=th
Thursday, May 14, 2009
1995?
2009 won't be 1995 all over again. In some ways, it will be worse.
Between the most recent data that's been published on the Mexican economy (which tells us what was happening three months ago...) and the AH1N1 virus, the contraction this year will be close to the 6.2% nosedive the economy took fourteen years ago.
Why worse? Because even in 1995, not all of the economy contracted. Exports grew, creating jobs and mitigating the economy's fall. This year, exports are plunging and, worse yet, no one expects an export boom next year. The domestic economy hasn't been -- and won't be -- able to complement exports as Mexico's "motor of growth". So, if we don't have export-led growth, we're not likely to have much growth at all.
Deborah Riner
Between the most recent data that's been published on the Mexican economy (which tells us what was happening three months ago...) and the AH1N1 virus, the contraction this year will be close to the 6.2% nosedive the economy took fourteen years ago.
Why worse? Because even in 1995, not all of the economy contracted. Exports grew, creating jobs and mitigating the economy's fall. This year, exports are plunging and, worse yet, no one expects an export boom next year. The domestic economy hasn't been -- and won't be -- able to complement exports as Mexico's "motor of growth". So, if we don't have export-led growth, we're not likely to have much growth at all.
Deborah Riner
Monday, May 11, 2009
Small is beautiful...
The Obama Administration is undertaking a major policy change with its decision to reverse the Bush Administration's policies on monopolies. The new policy, which will be the subject of a speech by the head of the Justice Department's Antitrust Division at the US Chamber of Commerce on Tuesday, May 12, will initiate a government policy designed to end practices that limit competition. Sectors of the economy that are likey to be affected include: agriculture, energy, health care, technology and telecommunications companies as well as some firms in financial services.
Friday, May 8, 2009
Stress test results are out...
The good news for the 19 US banks (some, like GMAC and Goldmam Sachs), of recent creation) subjected to the stress tests is that they only need to raise US$75 billion in additional capital between them. The 19 hold 2/3 of all deposits in banks in the US.
The bad news is that "Under regulators’ worst-case assumptions, the 19 banks might suffer $600 billion in losses through 2010, on top of the hundreds of billions that have already vaporized in this financial crisis. About 9 percent of all loans might sour — a figure that is even higher than it was during the Great Depression. One in five credit card loans could go unpaid, more than double the typical loss rate. Approximately one in 10 mortgages could sour. " (New York Times, May 8, 2009)
The bad news is that "Under regulators’ worst-case assumptions, the 19 banks might suffer $600 billion in losses through 2010, on top of the hundreds of billions that have already vaporized in this financial crisis. About 9 percent of all loans might sour — a figure that is even higher than it was during the Great Depression. One in five credit card loans could go unpaid, more than double the typical loss rate. Approximately one in 10 mortgages could sour. " (New York Times, May 8, 2009)
Wednesday, May 6, 2009
From bad to worse...
It’s too early to say with any certainty how much the outbreak of the new influenza virus, AH1N1, and the measures to control it will accentuate the economic contraction this year but there’s no doubt it will. On May 5, Hacienda advanced an estimate that AH1N1 will cut growth by 0.3 – 0.5 percentage points this year. Other estimates go as high as a full percentage point.
It’s important to put the estimates of the impact of AH1N1 in a broader context: even before the outbreak of AH1N1, economists, public and private, were revising their projections to predict a larger drop in GDP in light of the data that’s been published on the economy’s evolution in the first months of the year. The IGAE, the monthly indicator of economic activity which gives us a preliminary read on GDP, contracted in January and February at rates that can only be described as shocking. Published on April 28, when the uncertainty about the extent and danger posed by AH1N1 was at its height, INEGI reported that February’s IGAE dropped 10.8% (compared to February 2008). The secondary (industrial) sector of the economy plunged 13.2% and the primary sector (agriculture) fell 7.1%. The tertiary (services) sector dropped 9.6%. With the secondary and tertiary sectors accounting for all but 4% of GDP (35% and 63%, respectively), the outlook for the first quarter is bleak indeed: Hacienda is projecting a 7% drop in GDP in the first quarter.
The impact of the AH1N1 influenza virus will show up in the second quarter growth figures, when the growth rate will also suffer from the Semana Santa comparison. (Semana Santa fell in March of 2008 and in April this year.) The first half of this year will be disastrous, in terms of growth.
On April 29, Banco de Mexico (Banxico), the central bank, projected that GDP will fall 3.8% to 4.8% this year – without taking into account the impact of AH1N1. Hacienda is projecting a drop of 3.8% to 4.0% -- pre-AH1N1. The contraction this year should still not be as bad as in 1995, but we’re getting uncomfortably close…
On May 5, Hacienda announced an “anti-epidemic stimulus program”. Of the $18.8 billion, $10.0 billion consists of tax income the government won’t receive and for which the government won’t compensate by cutting other expenditures or raising taxes. The rest – $8.8 billion – is less than 0.1% of GDP.
The “anti-epidemic stimulus program” demonstrates the government’s awareness of the damage AH1N1 is wrecking on the economy. But, as far as mitigating its impact goes, the program’s importance is symbolic.
It’s important to put the estimates of the impact of AH1N1 in a broader context: even before the outbreak of AH1N1, economists, public and private, were revising their projections to predict a larger drop in GDP in light of the data that’s been published on the economy’s evolution in the first months of the year. The IGAE, the monthly indicator of economic activity which gives us a preliminary read on GDP, contracted in January and February at rates that can only be described as shocking. Published on April 28, when the uncertainty about the extent and danger posed by AH1N1 was at its height, INEGI reported that February’s IGAE dropped 10.8% (compared to February 2008). The secondary (industrial) sector of the economy plunged 13.2% and the primary sector (agriculture) fell 7.1%. The tertiary (services) sector dropped 9.6%. With the secondary and tertiary sectors accounting for all but 4% of GDP (35% and 63%, respectively), the outlook for the first quarter is bleak indeed: Hacienda is projecting a 7% drop in GDP in the first quarter.
The impact of the AH1N1 influenza virus will show up in the second quarter growth figures, when the growth rate will also suffer from the Semana Santa comparison. (Semana Santa fell in March of 2008 and in April this year.) The first half of this year will be disastrous, in terms of growth.
On April 29, Banco de Mexico (Banxico), the central bank, projected that GDP will fall 3.8% to 4.8% this year – without taking into account the impact of AH1N1. Hacienda is projecting a drop of 3.8% to 4.0% -- pre-AH1N1. The contraction this year should still not be as bad as in 1995, but we’re getting uncomfortably close…
On May 5, Hacienda announced an “anti-epidemic stimulus program”. Of the $18.8 billion, $10.0 billion consists of tax income the government won’t receive and for which the government won’t compensate by cutting other expenditures or raising taxes. The rest – $8.8 billion – is less than 0.1% of GDP.
The “anti-epidemic stimulus program” demonstrates the government’s awareness of the damage AH1N1 is wrecking on the economy. But, as far as mitigating its impact goes, the program’s importance is symbolic.
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