RSS FeedEconomic Mood Swing
Posted by Senan
Anyone else sense the mood change? Ok, we've had the O'Donoghue expenses scandal, we're facing into another difficult budget, unemployment is still increasing, and the economy is still contracting...but! Beyond our own shores, out in the wider world; bears are becoming bulls, JC Trichet is talking about the process of unwinding fiscal stimulus, and the sun is even shining!
Today, big aluminium company Alcoa reported a return to profit based on cost-cutting measures and increased demand. NorskHydro also popped based on the news. In the coming days earnings will be reported by many companies that will provide an indicator as to how well things are really shaping up. Perspective is urged though as even if companies beat expectations it must be borne in mind that compared to previous years profitability is likely down significantly.
So it's all good right? Well, despite the increasing evidence that the worst is over, more and more are focusing on 2010 and 2011 predictions, and the conclusions are not often favorable. While most countries may pull out of recession, growth is another matter. Some believe we are in for a sustained period of stagnation ('U' shared recovery), others think that the market is becoming overbought relative to economic fundamentals and that there will be a big correction ('W' shaped recovery), while the optimists among us still cling to the hope of a sustained and lasting bounce ('V' shaped recovery). From my own reading (not necessarily my own opinion), most are in camp 'U', and growing number are in camp 'W', and a dwindling number are in camp 'V'.
No matter what angle you take on it, Ireland is likely to lag. Our flagship companies such as AIB, Bank Of Ireland, Independent News & Media, and Aer Lingus all have their own big issues to overcome. And our dithering rulers don't seem to be helping.
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