How will the events of Sept. 11 affect the global economy?
That question is on the minds and in the hearts of everyone these days. As a businessperson, determining what lies ahead is always important when you attempt to draw up a business plan– a task that typically follows the calendar year. If you haven’t already started working on your 2002 business plan, chances are you will begin soon.
The thing is, there is no reference point for what lies ahead because these are such different and uncertain times. The U.S. economy has certainly taken a hit in the past six weeks. While it’s true the downward slide had begun before the terrorist attacks, the length and degree to which an economic slowdown will play out will continue to be a tough call.
For one thing, the impact on people’s long-term investments and financial security will be slow in surfacing. The same holds true for company profitability and any potential future job losses. The picture will simply unfold slowly.
All of this matters to you because it influences where pork is purchased, how much is purchased and which cuts. Pork tends to be more recession-proof than beef, but when the economy turns south, the trickle-down theory moves faster than it does when the economy turns back higher.
Shayle Shagum, USDA livestock commodity analyst, offers some perspective: “2001 has been a year of economic slowdown for all three major world financial engines. The United States, the European Union and Japan have all experienced slow growth in their gross domestic product. The United States' GDP will slow to about 1 percent, the EU will do slightly better; however, it will be down from 2000 numbers, and Japan will experience negative GDP growth in 2001.”
He points out that GDP growth had slowed greatly during the first and second quarters of 2001, consumer confidence was dropping, unemployment was on the rise, company inventories were growing, and wealth accumulated in the 1990’s stock market rally was evaporating.
Prior to Sept. 11, many economists were expecting the U.S. economy to recover in the fourth quarter. Now, Shagum points out, the GDP will not recover to its pre-Sept. 11 level until late 2002 or first quarter 2003.
“Before Sept. 11, the U.S. economy was slowing, but it was not yet in a recession,” notes Shagum. “However, after that date, the country definitely moved into a recession.”
He does expect to see growth in Europe before that time frame. The U.S. dollar will soften later this year, continuing to weaken into 2002, Shagum says. That will spark an economic rebound for the EU. “Growth in the United States is expected to move just beyond 2 percent by the end of 2002,” he adds. “In the EU, with its proposed rate cuts, we could see GDP growth by as much as 4 percent.”