Results to KWR Advisor Economic Survey – April/May Edition

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Responses were received from readers in the United States, North and Southeast Asia representing professions including accounting, legal and consulting services, public/investor relations, marketing/advertising and manufacturing. Five questions were asked with responses including:

1) How do you believe the Chinese economy will perform over remainder of year? (Please rate on a scale of 1-10, 1 indicating extreme slowdown and 10 indicating 10 extreme growth)

Mean Answer: 6.43


China's government appears to be under pressure to "share the wealth" in rural areas. This will lead to lending and projects that are based on non-economic factors, such as political appeasement. That, in turn, will lead to overall lower rates of return. This would not be such a grave concern if China didn't concurrently face a non-performing loan crisis. It is pretty hard to clean up bad loans if the overall ROI is decreasing. I am not saying these events will manifest themselves in the time frame of your poll, but that is the long-term trend in my opinion. Consultant, Northeast U.S.

2) How do you believe the U.S. economy will perform over remainder of year? (Please rate on a scale of 1-10, 1 indicating extreme slowdown and 10 indicating 10 extreme growth)

Mean Answer: 5.43


This is the toughest call. I can't put my finger on it, but something about the rise in energy prices strikes me as phony and thus temporary. G-7 countries continue to increase trade to each other that flows though China (i.e. GE makes a widget in China that is then exported to Japan) but, outside of capital goods, exports and sales to China as the final destination seem to be flattening. Therefore, US growth depends on the rest of G-7 growth, which, ironically, is somewhat dependent on continued growth in China. That's what makes this such a hard nut to crack. Bottom line, I see another low-growth, deflation scare on the horizon. Consultant, Northeast U.S.

There is a lot of momentum going into the second half of the year. I do expect some slowing but not until late fall. Investment Analyst Specialist, West Coast U.S.

3) How do you believe the Japanese economy will perform over remainder of year? (Please rate on a scale of 1-10, 1 indicating extreme slowdown and 10 indicating 10 extreme growth)

Mean Answer: 5.71


Japan is the leader in creating phony inflation and it's not hard to understand why. But the rest of the big economies are all, in varying degrees, latching on to the same strategy. The problem is, Japan's track record in maintaining growth/inflation expectations for more than a couple of quarters are dismal. The hope is that suasion on the part of players in high places (BoJ, Takanaka, Greenspan, etc.) will spur private sector players to then fulfill these prediction with actual economic activity, raising prices (most importantly real estate) and inflate their way out of NPL's. This is highly dubious and hasn't worked yet. Consultant, Northeast U.S.

Relative to the last 10 years I would expect that as consumers begin to "give in" to their pent up desires growth in Japan will accelerate. Much as in America, when the next door neighbor gets a new car or a remodeled kitchen, the Japanese will want to keep up with the Joneses. Investment Analyst, West Coast U.S.

4) Do you think government policymakers and investors should be more concerned with deflation or inflation? (Please rate on a scale of 1-10, 1 indicating strong concern about deflation and 10 indicating strong concern about inflation)

Mean Answer: 6.43


This is a double edged sword:deflation if the currency appreciates, inflation if the currency depreciates. In this instance I think Greenspan is correct the balance is equal between the two. Investment Analyst, West Coast U.S.

5) Are their any economic issues that you think may have a major positive or negative impact on global financial markets that you think are not being adequately recognized today?

The rapid rise of US debt. Consultant, Northeast U.S.

The unwinding of the carry trades' impact upon foreign currency and debt markets. Once again, portfolio flows may wreak havoc on economies; much of it a result of the policy of the Federal Reserve here in the US. Investment Analyst, West Coast U.S.
Consumer debt levels in the United States, and an unprecedented level of indebtedness during wartime. Technology Consultant, Japan

The long term importance of Asia to the world's future growth and the potential risk of a simultaneous Indian post-election change in policies and Chinese slowdown in growth. Legal Services, Southeast Asia.

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