There’s an old saying in the news business: If it bleeds, it leads. While coined in reference to crime and violence, business journalists know well that headlines about bad economic news tend to catch readers’ eyes.
Maybe that’s why many in the national media have spent the past 18 months or more asking if another global recession looms — sometimes only to answer their own question a day or two later with some report suggesting that the economy is still growing, thank you very much.
Prognostication is a risky game of educated guesswork. But the key word is educated.
And my educated guesswork doesn’t like the continuing signs coming out of China, especially the Asian giant’s slackening demand for commodities, whose extraction, processing and exportation help fuel the American economy, particularly our industrial sector.
The red flags are not new.
China’s communist government has been taking steps to right their national ship for about a year, starting with a cut in interest rates last November (five more followed). Then credit was loosened. And in August, the world’s No. 2 economy took steps to devalue its currency, leaving the yuan 1.9 percent weaker against the dollar.
While the move was intended to help Chinese exports revive flagging sales, it also meant China would probably import fewer goods from the rest of the world, including industrial commodities that had been vital to fueling China’s quarter century of growth and construction.
As with any stimulus package, there are those who will say that doing something is better than doing nothing, and China’s reputation as a tightly-controlled economy means we would expect nothing less.
But are those stimulus efforts helping the problem or hurting by scaring global markets even more?
News over the past two weeks has not been good.
China’s economic growth for the last quarter hit a six-year low of 6.9 percent, the Guardian pointed out, its slowest rate since the 6.2 percent figure seen during early 2009 and the global recession.
While those numbers would seem to be the envy of many other industrialized nations, remember that China’s tightly controlled economy is matched by tightly controlled release of information, and there are Western analysts who believe the country’s actual growth rate is somewhere in the range of 3 percent.
To put some of this in context, consider news in our own country this week, where gross domestic product growth slowed to 1.5 percent for the third quarter, down from 3.9 percent in the second quarter. As the Wall Street Journal also pointed out, however, adjusting for the fact that firms were letting inventories dwindle would put the growth rate at a healthier, but still cooling, 2.9 percent.
(As a healthy aside, remember that Central Pennsylvania added 13,800 nonfarm jobs over the year, according to a recent report, and state unemployment fell slightly, to 5.3 percent in September.)
So on some level, it may be that China economy is actually “right-sizing” in comparison with what is happening elsewhere, after years of staggering growth (even accounting for possible exaggeration in official figures).
Fine. Maybe. But slower is slower, and there seems to be no doubt that China is consuming less and less of the commodities and products we and other countries have been selling, and that has meant pain at home.
If you haven’t already, take a good long read of this recent New York Times report, which examines the impact of China’s cooldown on American sectors from oil and gas to steel and soybeans.
As I said, tragedy makes for compelling news stories.
They may be states away, but the loss of shale energy jobs in North Dakota and Illinois steelworkers fearing for their livelihood certainly resonate with readers in Pennsylvania.
Of course, the Times also points out that there have been some winners, including consumers who are paying less for food and just about everyone who relies on fossil fuels, including airlines.
The jury is still out on whether China’s malaise is leading the world toward another economic meltdown. But if the media are too quick to predict a catastrophe, news out of Beijing isn’t giving anyone anything to cheer about.