Sarah Hunter of Oxford Economics painted a less-than-rosy picture at the recent NFPA Annual Conference in San Antonio, Texas. In Part 1, we looked at the U.S.’s outlook. Here’s a recap of some of what she shared with the audience of fluid power manufacturers, distributors and users as to the rest of the globe.
• Europe is, to some extend, in a similar place to the U.S. The difference is that the base growth rate is much weaker. Oxford expects a much weaker growth rate, long term, than it saw at the end of 2015. Europe is also battling a poor demographic outlook, structural problems, and reforms. The worry is that Europe will turn into the next Japan.
• Japan is somehow in an even worse state than Europe, with all sorts of challenges there. It has long-term structural issues and a shrinking population—on top of a very rapidly shrinking working population, in demographic terms. Growth there is going to be ever harder to achieve. On top of that, they have a huge government debt deficit position that they’re trying to finance. Oxford is not that optimistic of Japan, and sees growth maybe at 1% this year and next, which is not a great outlook.
• With China, Hunter said that nobody really believes what their government is claiming—that the growth of last year was about 7%. The big problem there is manufacturing industry, it’s slowing quite sharply. Industry stagnated there last year, the worst that situation has appeared since 2009. Hunter said that authorities have been keeping growth going for the last eight years by building lots and lots of stuff: bridges, roads, train tracks, other infrastructure projects. “They’re an easy win for the authorities,” she said. “You just put the money out there and tell someone to go build and they do and great, that’s adding capacity.” At the recent meeting of the party, they announced the growth targets for the next five years, going for about 6.5%. But Oxford thinks it’s hard to see how they can achieve that without continuing pumping this money in for investment—which isn’t sustainable long term.
• Brazil and Russia are already in recession, and Oxford has downgraded them recently. They think it’s going to get even worse there, as well as countries like Indonesia that are commodity producers. “Many rode the coattails of very high commodity prices for the last decade, and didn’t really put in place any long term structural reforms to improve the capacity in the country,” she said.
• Her only bright spot was India. While that country’s numbers aren’t 9.8% or 9.7% growth seen a decade ago, it is at least around 7%—which is the fastest growing of the major emerging markets in the world. Hunter said it’s pretty good and they see the trend staying around, although it’s slowing a bit going forward. It, too, is battling with reforms, but at least they have a Prime Minister who was elected on a ticket to improve things, to put in place a structure of reforms that they need to really stimulate growth and go forward. If he can deliver, Hunter, said, things will be looking great