Wednesday, September 27, 2023

Boom and Bust


‘Germany’s GDP is expected to shrink by 0.5% this year as the EU’s largest economy continues to struggle with an energy crisis and higher interest rates, the IMK institute reported on Tuesday.

The IMK’s forecast of 0.7% GDP growth for 2024 is also significantly more pessimistic than its spring projection of 1.2%. Other German economic institutes such as the Ifo expect GDP growth of 1.4% for 2024.

“The German economy, weakened by energy price shocks, will not really get going in the coming months, because high interest rates and a subdued global economy are putting the brakes on,” the IMK stated.

The report predicted that private consumption will recover from the end of the third quarter due to declining inflation and stronger wage increases. “This positive development comes so late that it can only somewhat mitigate the recession in 2023 as a whole, not prevent it,” the IMK noted.

Germany officially slipped into a technical recession in the first quarter of the year as GDP growth was revised from zero to -0.3%. The Bundesbank announced last week that the economy was likely to shrink this quarter thanks to slow private consumption and the increasing weakness of industry.

Deutsche Bank CEO Christian Sewing previously warned that Germany could once again be called the ‘Sick Man of Europe’ if structural economic issues are not addressed immediately.’

Companies in the UK’s private sector have been downsizing their workforce at the fastest rate since the global financial crisis, apart from the Covid-19 pandemic lockdowns, as output fell in September, according to data published by S&P Global on Friday.

The latest flash S&P Global Composite Purchasing Managers’ Index (PMI) figure for the UK slipped to 46.8, down from 48.6 in August, and reached a 32-month low. The reading was well below the 50-mark, which separates growth from contraction, and lower than economists expected, S&P said.

“The disappointing PMI survey results for September mean a recession is looking increasingly likely in the UK,” Chris Williamson, chief business economist at S&P Global Market Intelligence, warned.

“The steep fall in output signalled by the flash PMI data is consistent with GDP contracting at a quarterly rate of over 0.4%, with a broad-based downturn gathering momentum to hint at few hopes of any imminent improvement.”

‘The British jobs market is facing an “abrupt turnaround,” prompting companies to shed staff at the fastest pace since the aftermath of the 2008 global financial crisis, excluding the pandemic, S&P said.

“A major concern in the inflation outlook has been wage growth, but with the survey now signalling the sharpest fall in employment since 2009, wage bargaining power is being eroded rapidly,” Williamson added.

Overall, private sector business activity in the UK fell at the fastest rate since March 2009 as the cost-of-living crisis and surging borrowing costs dented demand, S&P concluded.’

Boom and bust

‘It might be worthwhile reminding ourselves of what all this boom and bust actually means. In a capitalist society, the whole power of the state’s propaganda machine – press, radio, television, pulpits, government pronouncements, everything – is geared to one all-encompassing end: that the inescapable fate of the working class is to spend their entire working lives labouring for the benefit of the owning class. When nearly all the work force has knuckled down to this unavoidable destiny, it is called a boom. But every so often problems occur in the smooth functioning of this system; and they have occurred every so often ever since we’ve had capitalism. And when that happens, large numbers of the working class, despite having been brainwashed from early childhood into believing that there is no way to run society other than producing surplus value for the owning class – large numbers of them are then told they will not even be allowed to fulfil this divine decree, to work for the capitalists. On the one side, the work is obviously there to be done – food must be produced, clothing must be made, houses must be built – and all the raw materials are there, ready and waiting, or easily able to be produced. And on the other side, there are people desperately wanting to eat food, and to protect themselves from the weather with clothing and houses and so on: but where the owning class cannot see exactly how to make a profit out of it, then nobody is allowed to grow the food, make the clothes, build the houses, and all the rest of it. And it’s called a slump.’

From Socialist Standard March 2009

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