
Global recession fears grow as factory activity shrinks - hhs
https://www.reuters.com/article/us-global-economy/factory-activity-shrinks-across-asia-global-recession-fears-mount-idUSKCN1T40EI
======
lordnacho
Whether or not this is the start is not so important, but remember it's been a
while since the last one, and it's a common thing to occur in the economy, or
any other ecological system.

It's also something that has an important role. Investors at some point need
to decide which businesses are viable, which are not. Workers need to consider
career changes. Corporate entities need to consider which projects are
worthwhile. All those kinds of decisions are put to the test when not
everything can be given a long horizon.

Finally, there is a twist this time. We've been running a financial experiment
with few parallels over the last decade or so.

~~~
coolaliasbro
These considerations are requisite only in a capitalist system. In other
economic models it is not a given that ”[i]nvestors...need to decide which
businesses are viable... Workers need to consider career changes." In fact,
the division between investors on the one hand and workers in the other is a
large part of this problem. If we socialized gains and privatized losses (in
the sense of never bailing out those agents that got themselves into bad
situations), these cycles would at worst be much less severe and frequent.

~~~
shanusmagnus
If we socialized gains and privatized losses, there'd be less severe cycles
because there'd be less economy to have cycles on.

------
baybal2
As somebody who worked in OEM electronics since my first real job 12 ago, I
can say for sure that manufacturing in China was on a downward slope since it
peaked at around 2010.

A way more alarming indicator is the receding semiconductor spendings, both
net and capital, for the last 3-4 years.

This means that not only stuff generally classified as "light industry goods"
going down. It means that big players in the industry expect much more
"inelastic goods" like server chips, telecom gear, and other
businessy/enterprise stuff to also go down.

To a lot of people, it was clear that we are heading for "a long winter" in
the industry for quite some time. People saw it as early as 2016.

~~~
Gibbon1
2016 you started seeing lead times for a whole variety of ordinary
semiconductors and discretes stretch way out. I think they were expecting a
recession but demand continued.

Feels like manufacturers are edgy and don't want to get caught out.

~~~
baybal2
I'd say, back then major players realised that they need to get more careful
with capital spendings.

In short term, _there was_ a demand overshoot, but now their decision seem
remarkably rational.

~~~
Gibbon1
I think in 2001 3Com got stuck with a $1 Billion worth of inventory that had
to be scrapped. Sales of durable goods tend to fall off a cliff during
recessions.

------
kylehotchkiss
Couldn’t this be caused by people’s waning desire to buy the next big thing
and keeping their devices longer? Rushing for the latest and greatest phone
doesn’t feel as exciting as it used to. Laptops and TVs last half a decade or
more now too.

~~~
baybal2
I believe it is more less it. People in my circles who pay big money for
serious market research papers showed me some in December. There was a very
visible trend of people deciding to downgrade for their third or fourth
smartphone.

Here is a repost of my post from December:

> Very true, I'd say a downgrade is the trend. I saw like 10+ people deciding
> to switch from "superphones" down to mid-range models, and even dumbphones
> for their new phones. People who had ultrabooks, often try Atom based
> notebooks and sufraces. The key deciding factor for such people, I think, is
> having a good screen and bearable ergonomics (no microscopic keyboards, or
> batteries.) The data I have access to tell that the "big screen, small CPU,"
> is the category with the biggest year on year growth. Atom based 14 and 15
> inchers are selling like hot cookies.

> As a person working in the industry, I can say that's a very visible trend.
> People switch their devices more due to battery and physical wear than
> actual need for more features.

> In that respect, things got very "Japanised" in respect that Japanese
> cellphone makers are often making new models every season with no real
> changes other than cosmetic.

> Japan is also the only developed market where "dumbphones" ever saw few
> upwards trends in last

~~~
Sharlin
What about those billion or so people who are just starting to get the taste
of consumption culture, having recently risen from poverty? Those quotes seem
very Western-centric.

~~~
baybal2
> recently risen from poverty? Those quotes seem very Western-centric.

Thinking of rich people in Asia only as those "nouveau riches" you see
glitzing their wealth in London and Dubai is also a very Western-centric view.

You have to remember that "rich foreigner" population you see in the West is
less than 1 percent of 1 percent of their home countries' populations, and
those usually go apart even from their home country definition of "rich people
class."

This is even more true for bigger emerging economies: in India and China, an
even bigger portion of relatively rich people is completely content with
staying at home, and not seeing a reason-d'etre in immigration to the West or
imitating Western lifestyles.

I was recently on assignment in Kazakhstan, where I rented a room in possibly
the most expensive coworking space in the country. All people around used mid-
tier Taiwanese brands. And those were the people who drived LC200s or
G-Wagons.

I had same feeling in Pakistan, where I met people making country's small,
budding middle class. All of them successful young professionals, with nice
cars, settled down families, and expensive houses in Bahria towns. None of
them ever cared of not owning a 20th iPhone or a 5Ghz gaming PC. Most cared
more about household appliances, and _not_ having to obsess about specs of
stuff they buy. They like practical, simple, well done stuff with some whiff
of nice design taste added.

~~~
Sharlin
Sure, iPhones etc are luxury products. But the rising demand for low or mid-
tier goods is still rising demand, and the production numbers of high-end SKUs
are naturally lower and unlikely to affect total numbers that much.

But the global smartphone market is quickly saturating, if it hasn’t already,
and _that_ is bound to affect numbers. Smartphone _tech_ is also quickly
nearing the flat end of the sigmoid curve, which naturally disincentivizes
upgrading.

------
Nano2rad
Fear of recession is irrational. There is no need for continuous growth.

~~~
choeger
If there shall be no growth, there may be no innovation. Essentially every
product and service has to be created the same way, using the same amount if
manual labor, as yesteryear.

Economical growth is not necessarily growth in consumption of resources. It is
also a measure of getting more out of less.

~~~
NeedMoreTea
I see, so there has been no new Japanese product or innovation during the 20
or 30 years of Japanese deflation? Every car is from 1990, every CD walkman
still available, created with techniques of the 1990s? Are you sure about
that?

I'm sorry, but nothing of what you say follows.

~~~
yorwba
The Japanese economy kept growing in terms of real GDP during that time:
[http://wolframalpha.com/input/?i=Japan+real+GDP](http://wolframalpha.com/input/?i=Japan+real+GDP)

~~~
NeedMoreTea
Yet Japan's current GDP is lower than that in 1995, and has only been over
1995 level in two years.

There was plenty of innovation, new methods, product launches and new
companies during the great Depression, even in the peak year of decline, and
in all countries affected.

GDP and GDP growth is a decidedly modern invention anyway.

~~~
yorwba
It's fundamentally meaningless to compare nominal GDP between different years
because of changes in the value of money. The current GDP of Japan is only
nominally less than in 1995 because the values are measured on different
scales.

The Great Depression would have been a better example to use because even real
GDP declined drastically.

------
frankbreetz
I feel like I have been reading these "global recession fears mount" for about
the last 6-7 years.

~~~
onlyrealcuzzo
Since Taper Tantrum in 2012, it's been non-stop.

I wonder if this is how economic reporting has always been. I wonder if it's
just click-bait feeding off of fear in readers' lizard brains.

From the outside, /most/ of the worries really do seem legit this time. I'm
young, so I don't know what other times were like. But at the least -- the
worries aren't fake news.

Taper tantrum seemed real. The European Banking Crisis -- I'm still not sure
how nothing happened there, especially with Italy. China has really been the
backbone for global growth since 2008, and Kyle Bass is making a pretty
convincing argument that at least some of that has been an illusion.

I know I hear over and over again that this is "the most reluctant bull market
in history". I'm sure every time is different. But I'm wondering if one of the
things that really is different is how much uncertainty has been at the core
of this market. There are very few people this time that believe everything is
rosey.

~~~
frankbreetz
I'm with you, I also feel too young to know if this is how it has always been
or not. We are in the longest period of growth for some time, and the
aforementioned temper tantrum, so it does seem like we are due for a
recession, but it is hard not to tune the noise out.

~~~
z2
I'm with you on the 'too young to know from experience' boat, though there are
groups that have been trying to measure the probability of recession through
macro indicators across consumption, production, and employment.
[https://www.chicagofed.org/publications/cfnai/index](https://www.chicagofed.org/publications/cfnai/index)

From speculation, while there are tons of factors that may be giving this
business cycle legs, I think one that's not spoken of enough is that many
business may be a bit less cyclical today. Thanks to the cloud, companies can
scale up and down on a whim rather than slowly build up an excess of hardware
and staff to maintain them. Even industrial companies like rail car
manufacturers have gotten smarter by leasing factories on short term and using
temporary labor.

~~~
shanusmagnus
This is a great point -- how are cycles different as capital costs plummet,
the velocity of information approaches infinity, saleable goods de-
materialize, labor pools globalize, and addressable markets approach all the
people on earth?

From my non-expert view, most of macro econ is practically religion anyways,
and their predictions are basically non-falsifiable. Even so, I'm sure some
informed folks have been thinking about these very issues, I just have no idea
who. Would love any pointers.

------
temp129038
Curious: does anyone actively sell stocks in this situation - even if it's in
a retirement portfolio you'd presumably not touch for a long time? I've sold
some in the last few weeks though I know the general advice is not really to
do anything.

~~~
sytelus
Anecdote: I've seen recession prediction virtually every month by some
trustworthy brilliant person during past 2 years. One of them was Mark Cuban
who actually went all cash in last October/November. This is what he had done
just before year 2000 bubble popped and he was one of the few surviving
billionaires. To his credit, market _did_ went bust on December 21, 2018 with
massive drop of 20%. I was literally in awe of Cuban's instinct but then the
market almost immediately recovered like nobody's business. I'm now suspecting
that government has developed some extraordinary tools to keep market stable.
Many conventional laws of economics are pretty much defunct at this point.
Massive QEs, printing money and racking up debt has done nothing to cause
inflation or any adverse effect. Even Iran situation, North Korea stuff, Seria
bombing - all of that barely even registered on market. There is something
very very strange going on.

~~~
segmondy
"Back in the spring of 1720, Sir Isaac Newton owned shares in the South Sea
Company, the hottest stock in England. Sensing that the market was getting out
of hand, the great physicist muttered that he ' could calculate the motions of
the heavenly bodies, but not the madness of the people.' Newton dumped his
South Sea shares, pocketing a 100% profit totaling £7,000. But just months
later, swept up in the wild enthusiasm of the market, Newton jumped back in at
a much higher price — and lost £20,000 (or more than $3 million in
[2002-2003's] money. For the rest of his life, he forbade anyone to speak the
words 'South Sea' in his presence."

[https://www.businessinsider.com/isaac-newton-lost-a-
fortune-...](https://www.businessinsider.com/isaac-newton-lost-a-fortune-on-
englands-hottest-stock-2016-1)

------
RickJWagner
I think it's likely we'll see a lot more economic news in the months ahead.

As Bill Clinton famously told us, US politics are largely anchored in the
economy. Public perception of the state of the economy is going to be very
much in focus through November of next year.

------
tanilama
I don't know though. I believe that I have saved carefully for the worse to
come, but I am not sure would it be sufficient or not.

Certainly not big capital spending whatsoever in next year. Risky time indeed.

------
bamboozled
Well, hopefully we see a decline in CO2 emissions for a while because of this.

~~~
sytelus
Probably not. Recession first impact vulnerable industries that depends on
government subsidies, growth and innovations. The alternative energy companies
are therefore first to be impacted. This is often exaggerated by reduced
prices of conventional energy as consumption drops. You would typically see
pull back in manufacturers releasing electric cars or people investing in
building solar/wind farms.

~~~
frankbreetz
The last decline, or non-increase I suppose, in CO2 was attributed to a global
recession

------
jaimex2
I can't see a global recession from this - just one in China and Australia
which is already in one.

~~~
marsRoverDev
I find it hard to believe that this will be contained to Australia and China.

Australia certainly deserves what it gets (my home country) given its attitude
towards debt and housing, but I think the contagion is real.

~~~
sonnyblarney
Contagion is real - but - contagion spreads along specific vectors, some more
damaging than others.

A China 'slowdown' will probably not hurt the US, in fact, it may give the US
leverage.

A China 'crash' will surely have emotional contagion among investors, which of
course matters, because if they pull the plug on activities it'll translate
into real world effects ...

But the 'material' contagion of a Chinese crash ... it's harder to predict.

I suggest that the issue is far more likely to be damaging as a 'trigger' to a
bubble burst or something else, rather than materially damaging in and of
itself.

~~~
raducu
I think people fear that the trouble in China is reduced global demand, not
just the trade wars or a local problem.

~~~
sonnyblarney
Yes, it will have knock-on effects, but a serious China slowdown is in and of
itself no reason to cause recession pretty much anywhere.

Again, it could burst some kind of bubble and start a recession, but a China
slowdown itself is not enough.

~~~
raducu
I was trying to point out that since China's factories are so much export
oriented that seeing decreased factory activity most likely means a weak
global demand.

If the problem was with chinese real-estate, yes, the risk for contagion was
minimal.

------
Theodores
Factory activity in Asia is a good indicator in a world where none of us can
easily see the wood for the trees. Shame the article wasn't big on actual
numbers.

We all have our local bubbles to contend with. In the US there are tariff
taxes that affect the world but are a US thing. Then, in the UK, there is the
joy of Brexit. You would not guess there was a problem if you were to be out
and about in the UK this last weekend, however, read the papers and you will
see stories about how that there is no inward investment, auto manufacturing
is kaput and the High Street is losing many shops. Speak to some people and
these indicators can be seen as unimportant, after all, isn't everyone buying
online these days so the High Street demise is more of a shift to other
fulfilment means, with no net loss involved? It can all be handwaved away.

With the example of Brexit the predicament can be blamed on Brexit and is
therefore not part of a global recession, even if the frozen UK economy
contributes to the big, global picture.

I am sure that in every market there is some local whataboutism, an ability to
blame a local recession on silly politicians, a business scandal or some other
local factor. In this way we could all walk into a global recession without
anyone seeing it, thinking it was just us that was feeling a bit skint.

There are always people thinking we are on the verge of some mega crash.
Personally I have been expecting the housing bubble to collapse for many
decades but it has not happened. I have given up on that one now. I once
worked in weather forecasting and, if you listened to me, then you would
always have expected rain (I didn't understand low-lying clouds too well).
Because of this tendency and bias that we all have it can be hard to make
sense of media pundits and their forecasts of the economy. We also only listen
to those that we are inclined to agree with.

There are always some indicators that are fact oriented and helpful, I think
factory activity in Asia is one.

What I am surprised at is that there isn't a good indicator based on internet
search activity. For instance, with the housing market in northern climes
there is what the mortgage industry says for PR and then there is reality.
Sales of flooring products, and by proxy, internet searches for flooring
products may be a better indicator. Nobody fetishes over getting new carpets
or laminate floors, people don't overly window shop for it, they just buy that
stuff when they move home or have money to upgrade their existing dwelling. It
is a purchase that can be easily put off. I need a 'basket' of these
indicators and some Google Trends 'fu' to see the wood for the trees.

~~~
mxuribe
> ...there isn't a good indicator based on internet search activity...

For this one point, Google Trends (formerly known as Zeitgeist) is available:
[https://trends.google.com/trends/?geo=US](https://trends.google.com/trends/?geo=US)

But, I'll caveat that it is __AN INDICATOR __, and __not the only
__indicator...And in fact, not even sure if search activity is a good enough
signal to use as an input...Or at least not in isolation. Putting my digital
adversarial hat on, if i had even meager resources to organize a bot farm to
cleverly submit tons of searches in one direction or another, i think that
would sufficiently skew your input signal right there. Just sayin '.

------
KuhlMensch
Hm, I think some people may have missed this bit:

 _The trade conflict between China and the United States escalated last month
when Trump raised tariffs on some Chinese imports to 25% from 10% and
threatened levies on all Chinese goods._

 _If that were to happen, and China were to retaliate, “we could end up in a
(global) recession in three quarters”, said Chetan Ahya, global head of
economics at Morgan Stanley._

It strikes me as quite a precise predication. Though of course, that does not
mean it is correct.

------
sytelus
TLDR; Terrifs are the root cause. With continued increase terrif recession
might be official within 3 quarters. JP Morgan has taken u-turn and is
expecting 2 rate cuts from feds. Other central banks around the world are
planning rate cuts as well. South Korea production fell by 2X than expected.
Not all economies are loser, however, India and Vietnam might see increased
business.

~~~
zZsFBVZ9bjdJd
Hard to take you serious when you misspell "tariff"

~~~
futureastronaut
Terrific!

