China’s imports number fell more than expected, another sign that an economy that grew at 10% or more per year for a decade has moved into a recession of sorts. Exports decreased 0.5% and imports fell 15.3% from a year earlier in January. The overall trade surplus was $27.3 billion. The International Monetary Fund reported last week that its forecast of 8.4% GDP growth in China this year could be much too high. That number could drop by four full points if trouble in Europe grows. And it has. Greece recently said its unemployment rate reached nearly 21%. The number is already higher than than in Spain. Several of the eurozone’s southern countries have admitted that they are in new recessions. China may have begun to import less because it does not need raw materials for its factories and its new middle class is concerned about its economic future.
Still No Greek Deal
The situation with Greece’s debt, which seemed better for a few hours as its leader met with European Union, European Central Bank and IMF officials in Brussels, is bad again. It appeared that those three groups would release the money Greece needs to cover its March obligations so as not to default. But that capital comes with strict restrictions, and the Greeks may be unable to accommodate them. Greece has to show its financiers that planned austerity programs are well underway and that all of the political powers in the country have endorsed them. That broad political endorsement is by no means assured as leaders jockey for the approval of sullen voters who believe austerity measures have gone too far.
Google Home Entertainment
Rumors have started to spread across the tech world that Google (NASDAQ: GOOG) will release a home entertainment system that can stream music throughout people’s homes. The press has speculated that the world’s largest search company believes it can follow Apple (NASDAQ: AAPL) into the hardware business. Apple is widely admired for its ability to marry devices with apps and entertainment. Google has started down the path of hardware integration with it purchase of handset firm Motorola (NYSE: MMI). Google may find the going rough, though. Most hardware companies have very modest margins, or make no money at all, as companies that make products to compete with the iPhone and iPad have already discovered.
Additional Job Cuts
PepsiCo (NYSE: PEP) and Alcatel-Lucent (NYSE: ALU) are the latest multinationals to “reorganize” their businesses for the future. At Alcatel this means a cut of 1,800 people. At Pepsi it means dropping 8,700 workers. These restructurings are presented to investors and the press as ways to drive efficiency and margins. A look below the surface at most companies that take this path reveals that sales have faltered and management needs a way to show investors that they can make even modest returns.
Douglas A. McIntyre
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