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Rays of recovery - SEASI sees signs of global recovery

The global economic environment remained gloomy throughout the first half of 2009. Industrial production in many countries declined substantially, especially in the first quarter. Japan, Taiwan, Ukraine, Spain, Turkey and Italy were particularly hard hit, registering declines of more than 20% in the first quarter of 2009. China, with an increase of 5.7% in industrial production for the same period, was the exception.

Nonetheless, there are signs of economic recovery lately. IMF has in July 2009, revised its forecast of the world economy from a decline of 1.3% in 2009 as forecasted in April, to a growth of 2.5%. IMF also revised China's GDP growth rate in 2009 from 6.5% to 7.5% and India's GDP growth from 4.5% to 5.4%.

For USA, there are various signs of moderate recovery in the country's economy since the second quarter of 2009. The trend of decline in many sectors is now moderating. According to the Institute of Supply Management, USA, the Purchasing Managers Index in July 2009 rose to 48.9% from 44.8% in June. The new orders index from the manufacturing sector increased from 49.2% in June 2009 to 55.3% in July, while the employment index rose from 40.7% to 45.7% for the same period. US crude steel production dropped substantially from an average of more than 8 million tonnes per month in the first half of 2008 to a record low of below 4 million tonnes per month in the second half of 2008.

Japan's industrial output rose 2.4% in June 2009. According to the Ministry of Economy, Trade and Industry, production was largely boosted by higher output of electronic components and devices, steel products and chemicals. Crude steel production showed a significant increase in the second quarter. Japan's crude steel production hit the lowest level in February 2009 at 5.5 million tonnes. The volume picked up gradually to reach 7.7 million tonnes in July 2009. According to the Japan Iron & Steel Federation, inventory of ordinary steel products declined gradually since December 2008 to April 2009 and the volume picked up slightly in May and June 2009.

China's economy is growing significantly in 2009. Total fixed assets investment rose by 33.5% in the first half of 2009, compared to 25.5% in the whole year of 2008. Industrial output registered a substantial growth rate. China's motor vehicle production in the first half of 2009 rose by 38.8% to 6.2 million units. Cement production surged from 158 million tonnes in the first half of 2008 to 734 million tonnes in the same period of 2009. Rebar production from January to July 2009 registered 67.7 million tonnes, an increase of 23.4% from the same period of 2008.

For ASEAN, industrial production indices of the member countries started to show signs of moderate pick up in the second quarter of 2009. Indonesia's industrial production in April for the first time showed a positive growth rate of 1.47% YoY. The country's Finance Minister predicted that the national economy will grow by more than 4% in the third quarter of 2009, driven by stronger exports, imports and investment flows.

Malaysia's industrial production indices rose slightly since March 2009. However, the growth rates were relatively low when compared to that of 2008. According to the Department of Statistics, sales value of manufacturing sectors in the first half of 2009 dropped by 25.5%, when compared to the same period of 2008. Nevertheless, economists were optimistic that there were signs of recovery, possibly due to re-stocking activities.

Singapore's Industrial Production Indices have been fluctuating and remained at low levels throughout the first half of 2009. Total manufacturing index registered 89.0 in June 2009, compared to 95.8 for the whole year of 2008. Nonetheless, production index of electrical machinery, paper & paper products and foods, beverages & tobacco registered above 100 in the second quarter of 2009. The construction sector, which is the major steel consuming sector in the country, remained relatively subdued. Value of contracts awarded and progress payments certified remained at below SGD 2,000 million per month in early parts of 2009 and dropped to SGD 871 million in June 2009.

Thailand's Industrial Production Index picked up moderately in the second quarter of 2009. The index of 172.12 in the second quarter of 2009, compared to 162.50 in the first quarter of 2009 was relatively low when compared to the indices of more than 190 recorded in the previous quarters. Production index for iron and steel products showed signs of recovery since January 2009. The index in June 2009 was 117.31 as compared to 101.80 in May 2009. Production indices for vehicles and equipments were stagnant between January and April 2009. The indices, however, surged in May and June 2009 to 195 and 237, respectively. Although there is a moderate sign of pick-up, the volume is relatively low when compared to the record in early 2008. Some sectors such as electronics have seen active restocking activities, but they were insufficient to offset bigger production slump in other sectors.

Vietnam's Ministry of Industry and Trade reported that the industrial production value in July 2009 reached VND 59.1 trillion, up by 2.3% MoM and up by 7.6% YoY. While green shoots are beginning to emerge in different parts of the world, the global economy is still vulnerable to shocks that could derail the recovery process.

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