[966] Of a major slowdown in 2007?

If you think 2006 is bad because of higher energy prices, you probably haven’t heard about what’s in store for you in 2007. Consumption in the US is slowing down and there’s an expectation that the slowdown will affect world economy:

KUALA LUMPUR, Nov 13 (Bernama) — The slowdown of consumer spending in the United States is expected to dampen overall global economic growth in 2008, says UBS Investment Bank’s deputy global economic head Paul Donovan.

“We are looking at a slower growth of the global economy, led by a slowdown in US consumer consumption,” he told reporters here Monday.

Donovan said the overall global economy is expected to be at 3.7 percent in 2008 compared with 4.5 percent last year.

The yesterday edition of The Edge has a few interesting articles in it. One of its reports highlights the slowdown of demand for electronics in the US. I’m unable to find the same article online but it’s titled “Who’s afraid of an electronics slowdown?” if you’re interested in searching for the article.

Worry not though because The Star has a report on similar issue:

KUALA LUMPUR: Anecdotally, equity analysts are seeing corporate book-to-build rates falling for electronic firms in the US, according to UBS Investment Bank managing director, deputy head of global economics Paul Donovan.

“Economies such as Taiwan, Thailand, Singapore and Malaysia, with substantial semiconductor sectors, can expect a slowdown in demand,” he told a press briefing yesterday.

You might notice that both Bernama and The Star reports quoted the same person from UBS. The Edge report however does not do the same. The Edge report was written by individuals from DBS. So, it’s not really an one-man opinion.

According to a graph attached to The Edge article, electronics makes up about 40% of Malaysian total export. Needless to say, the slowdown in demand will affect Malaysia.

Already, people are talking about a bearish 2007. Just check out this Mongan Stanley article:

Surely, there must be more to a US$46 trillion global economy than the American consumer and the Chinese producer. Not only is that the current verdict of financial markets, but it is also consistent with the sentiment I have been picking up from a broad cross-section of our clients — business executives, investors and senior government officials — as I travel the world this fall. While they concede the possibility that these two engines of global growth may, indeed, slow in 2007, there is a general belief that other economies are now perfectly capable of filling the void. Hope springs eternal that such a global decoupling would allow an increasingly vibrant global economy to keep growing while barely skipping a beat. My advice: Don’t count on it.

So, before 2007 comes, let’s live 2006 to its fullest – spend till you drop! If you haven’t dropped already, that is. LOL!

(It’s better start saving now though. But like all good things in economics, it depends on your personal preference — in this case, inter-temporal preference; i.e. interest rate — which is really hard to measure in spite of progress made in economics.)

p/s – I admit. The talk of a recession started way early in the year back in January when an inverted yield curve made an appearance.