World in recession

Press, 19 August 1982, Page 23

World in recession

The world is in the worst economic recession for 50 years, led by the United States which is being crippled by high unemployment and high interest rates at the same time. Much has been said on the United States economy, but the following paragraphs show to what extent the United States has exported its problems to the rest of the world. An unexpectedly sharp fall in industrial output is intensifying pressure on the British Government to reduce interest rates further and take new measures to stimulate the economy. News of a 1.7 per cent fall in manufacturing output in June over May, and a 1.5 per cent drop in total industrial production suggest the British economy is stagnating this summer.

The Government has responded to calls for reflationary measures from employers and trade unions by abolishing controls on hire purchase, granting some aid to the unemployed, and by engineering cuts in commercial bank lending rates. But analysts say the output figures underscored the depth of the recession and poor industrial performance, despite Government assurances that the economy was starting to pick up.

The Government attributed part of the sharp fall in output to seasonal holiday factors, but it admitted that the decline also represented a genuine downturn-in industrial activity. Each month this year, industrial production statistics have been revised downwards, and the latest figures show that May industrial output was well below official estimates. The latest fall was foreshadowed to some extent by a gloomy survey published earlier this month by the Confederation of British Industry XC.B.L), which showed a sharp decline in business confidence. It said manufacturing output and orders were down and likely to remain depressed for some months. The worst wave of bankruptcies since World War II swept West Germany during the first six months of 1982, according to figures issued yesterday by the Federal Statistics Office. It said the number of corporate insolvencies amounted to 5676, a rise of more than 50 per cent compared with the same period last year. More thhn 6000 businesses and 16.500 individuals have gone bankrupt this year in Canada, which is going through its worst recession for 50 years, the Canadian Government announced recently.

The number of bankruptcies was 30 per cent up on last year. Conditions in Japan are the worst, for eight years. The business performance of Japanese companies, especially smaller ones, is deteriorating rapidly because of slow growth of Japanese exports, sluggish personal spending and other factors, the Japanese International Trade and Industry Ministry said in a survey. The survey, conducted in July, said the prolonged economic slump is now affecting not only material-orientated industries but also manufacturing industries such as vehicles, electric, machinery and machine tools. The Ministry compiled the report after discussions with representatives of 23 industries including steel, hous-

ing, vehicles, trading and oils. The report said the industry representative, voiced serious concern about the present situation and future outlook of their business performance, citing a continuing slow growth in exports as the main reason. They also cited the yen’s depreciation against the United States dollar and sluggish consumer spending as other factors behind the prolonged slump, the report said.