NEW YORK, July 2: It is widely acknowledged now that the global economy is reeling under the twin strains of acute food shortage and soaring price of oil. The debacle in America's subprime lending has added to the woes. Or is it the principal reason for the US economy slipping into recession and taking in its sweep the rest of the world?
The situation is very grim. World Bank President Robert Zoellick, International Monetary Fund managing Director Dominique Strauss-Kahn and the World Food Programme have been prompted to say a disaster of gigantic proportion is staring at the world. What we are witnessing is 'not a natural disaster, a silent tsunami or a perfect storm', Robert Zoellick was quoted as saying by The New York Times. It is a man-made catastrophe and as such must be fixed by people, the WB president said.
The auto manufacturers in US are mute spectators to the industry taking a deep plunge. The sales of cars and trucks have dropped to the lowest level in more than a decade. High gas price and weak economy have been attributed as the cause. There has been an 18 per cent drop in the sales of cars and trucks. The US giants -- Ford Motors, General Motors and Chrysler -- saw their sales plummeting by 28, 18 and 36 per cent respectively.
In further sign of a deepening economic crisis Starbucks , America's and world's largest coffee chain announced that it would shut down 600 stores around America and cut more than 12000 jobs. A cavalcade of economic troubles from imploding house markets to rising gas price are pinching consumers, hurting not only Starbucks but nearly all retailers. Starbucks has always been known for its aggressive marketing.
Siemens, the German engineering and electronic giant has announced that it was cutting 17,000, mostly white colour jobs to reduce its cost base. Siemens is more than 160 years old and has a work force of over 400,000 globally. Siemens has an office in Bangladesh. Siemens expect to cut cost by 1.2 billion euros by 2010.
High inflation, exploding energy cost, credit crunch and worries about an inflationary psychology have become global concern an analysts said. China and India, two emerging tigers, have not been spared.. There have been decline in all major stock markets pointing to the same economic concerns are at play. Central banks around the world, America included, are moving to head off growing inflation by raising interest rates. It may placate inflation but will squelch development. China, world's fastest growing economy, is struggling to control inflation without hurting its economy. The growth is fast fading in Europe.
Economists feel that the troubles are not likely to go soon. Joblessness has accelerated and employers have slashed working hours even for those already on their payroll, shrinking the size of the pay cheques. The labour market in America is witnessing reluctance of the employers to add more jobs. They have been engaged in mass retrenchment. This will continue until the end of 2009, an expert said. The slide in the labour market has become both symptom and cause of a weak economy. The US treasury secretary Henry Paulson said the US will soon 'right its economy and financial markets'.
