Return of the good times?

By Sheila Moorcroft

Our scanning indicates that the good times may genuinely be returning. The good news has been outweighing the bad, even during the recent US debt crisis, for several months now. The cumulative insight of our members’ scanning also picked up the early signs of the 2008 crash, before it was acknowledged, so we strongly believe that unless there are more major shocks, growth is returning.

Implications

The good news is: companies need not just to get ready for growth, but do so with increasing confidence. The graph below (Figure 2) shows the good news is growing, with a real bounce in mentions of growth over the past three months suggesting that the trend is now upwards, and not just a blip. We expect that to continue and that talk of recession will abate to near zero – despite continued concern about China and India slowing down and further problems in Europe – resulting in an accelerating net curve upwards.

Although the US debt crisis has passed this time round, it has not gone away; by February next year there will be a ‘soft ceiling’ then in March things will get tough again. We anticipate that as a result of the harsh criticism – even from its friends and allies – of the Republican Party’s intransigence and negotiating position, the next round will be very different and will not derail the global recovery. But a solution to US debt is undoubtedly needed.

Confidence is critical to economic stability, investment and growth, but so too is having a balanced view. Now that the immediate crisis has past we can begin to focus again on the potential for growth, but not ignoring the fact that there are still dangers lurking.

 What is changing?

Since 2004, Shaping Tomorrow has been using social networking to track and compare global economic driving and restraining forces by analysing the future-orientated stories contributed by its members.

The two charts below reflect our members’ contributions indicating the economic future, then and now. Please note, for technical reasons, the scale in Figure 1 is number of items mentioning the global economy, in Figure 2 percentages of new mentions entered. But we can still compare the indicators: it is the net effect and the movement that are important, not the absolute levels.

In the run up to the 2008 crash and recession, we could see that positive growth stories were falling from a high of 160 per month in 2004 to around 60 at the time of the crash, as shown by the red line. As the blue line indicates, there was a growing number of negative stories, the early warnings of danger ahead, which by August-September 2008 had reached around 60 per month from near zero in 2004. They then jumped to over 160. The yellow line shows the sudden plunge and negative balance, which signalled the beginning of the Great Crash and caused stock markets around the world to spook. We began warning our clients of this impending danger from 2006 onwards, using the graph on the front of our site as a global economic barometer.

Figure 1: The way we were – Recession versus Growth 2008-2009

We have continued to produce this graph, but until now the results could only be said to be stable and bumping along a very low bottom.

Since February 2013, just after the resolving of the Cyprus debt crisis, we have seen a slow increase in the good news, with less bad news to counterbalance it – until the US debt crisis started in August. Then in August, we also began to see a step change in good news, sufficient almost to outweigh those debt crisis discussions.

Figure 2: The way we are now – Recession versus Growth 2012 -2013 (% of total insights by publication date)

Contact us for private regular updates on how the global recovery is proceeding and the new dangers that may again knock it seriously off course.

 

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