Australian (ASX) Stock Market Forum

The recession has started?

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kingbrown said:
Re The transport industry is the Canary in the Coal mine ! :eek:
After ditching 380 contractors Kenworth are now laying off full time staff


Kenworth Trucks has announced it will cut 80 manufacturing staff from its Melbourne factory in a further blow to Australia's automotive industry.

The announcement comes just days after Ford Australia said it would cut up to 350 jobs, or 15 per cent of its Australian manufacturing workforce, by November because of slow large-car sales.

The cuts at Kenworth Trucks will be made from September 5, management told the 1,100 staff at its Bayswater factory in Melbourne's outer east

Australian Manufacturing Workers Union shop steward at Kenworth Les Takacs said the job losses would cut production from 23 trucks a day to eight.

The company had cut 380 contractors since last year, he said.

http://news.theage.com.au/national/kenworth-trucks-to-cut-80-jobs-20080826-429h.html
Click to expand...

Losses in trucking and large-car manufacturing can only be expected with peak oil. Hopefully there is a shift in employment to train infrastructure and rolling stock.

As much as I like Falcons, Ford needed to spend millions on a new one like it needed a hole in the head.
 
MODS!!!!

I meant to post my hypothetical question about a hypothetical Sydney property to the falling house prices thread. I'll reply to the replies here, but should I post again in the right place or would somebody move the posts please?

Thanks

Ghoti (of the hypothetical brain)
 
Happy said:
If anybody is in a position to tell how long property downturn will last, could be of assistance it this dilemma.

If you believe the mob that property prices will keep rising you should wait, otherwise sell and rent the other property as price might drop too – bet you did not think of this possibility
Click to expand...
You lose. Renting a place in the bush makes sense, whether the city place is sold or rented out. Another way to frame the question is to ask if the risk of a price fall on the city place is greater than the risk of losing out on a price gain. Only I don't know how to quantify a risk like that, so I'm in the process of building a spreadsheet that will show the effects of every scenario on the overall financial position. Hypothetically. For my friend. Of course.

Ghoti
 
pepperoni said:
Rent both.

Inner west will outperfrm bush bo so much medium term its not funny.
Click to expand...
I agree with that, but it might mean that city falls 5% and bush falls 15%, which might mean that the cost of the changeover in dollars goes up. I think. I haven't got that one in the spreadsheet yet.

Shares are much easier to deal with; fewer variables.
Tks,

Ghoti
 
white_goodman said:
the property down turn will last till
a)rents rise too high
b)cost of borrowing becomes cheaper
C)both

when the market gets to that equilibrium point where its more financially sound to have a mortgage then pay the rent is when we shall see the next upturn, <snip>
Click to expand...
I think a lot of the Sydney market must be at that point now, but I don't see a shadow of a sign of an upturn. Seems to me buying and renting are both financially ridiculous for most people, and the sensible thing to do is to forget about buying in Sydney. Oh wait... except for my friend's hypothetical house, of course.

Cheers,

Ghoti
 
Looks as if the Victorian automotive sector is starting to take a hit through the supply chain imo many more lay offs to come :(
Seems to be turning into a daily theme down here at the moment :eek:


CAR axle component supplier Unidrive has announced it will sack 40 workers, due to the downturn experienced by major car manufacturers.

Ford last week announced 350 redundancies and a reduction in plant operating hours and earlier this year Mitsubishi closed it's Adelaide plant.

Australian Manufacturing Workers Union (AMWU) secretary Steve Dargavel said the ramifications of those decisions were being felt by suppliers.

He said the job losses at Unidrive's Melbourne factory were a clear result of Ford downsizing.

"Unidrive used to employ over 500 workers, now it is 150, and after September it will reduce to 110.

"Unidrive's decision underscores the need for trade measures and industry policy that covers the entire automotive industry, inclusive of component suppliers.

"As major car companies reduce production, the demand for parts decreases and the components and subsidiary suppliers are at threat."

Mr Dargavel repeated the union's call for the federal and state governments to hold an urgent roundtable on the future of the automotive industry

http://www.news.com.au/story/0,23599,24248871-29277,00.html
 
fmz said:
Fairfax just announced to cut 550 jobs.

http://www.smh.com.au/news/national...across-business/2008/08/26/1219516472320.html
Click to expand...

Old news - already posted on this thread a couple of days ago when first announced.

And just to contrast - here's a story about 300 jobs being CREATED: http://news.smh.com.au/national/300-jobs-to-be-created-at-vic-it-centre-20080827-43nh.html

Other jobs are being created all the time as well, it's just not big news right now. How many people do you think RIO and BHP etc are looking to hire right now for example???? My current employer is hiring. I'm not discounting the reality of job losses at the moment - the economy is slowing, and remember the regulators have deliberately engineered this situation. A consequence of that of course has to be job losses and an increase in unemployment.

However, the big question STILL is this all enough for us to actually be in recession? I've been in the work force through one REAL recession and also through the tech-bust (as an investor and technology professional working in Silicon Valley in the US). This, to me, does not feel like a real recession yet.... time will tell. There's still too many sectors and companies etc still doing quite well. Remember a downturn in one sector (say auto manufacturing or discretionary retail) does not necessarily a full blown national recession make..... the workforce is 10,000,000+ - so even 50 newspaper stories touting a few hundred job losses each only adds up to an increase in unemployment of < 0.2%, assuming NO new jobs are also created at the same time in the economy elsewhere to absorb those losses.....

Cheers,

Beej
 
ghotib said:
I think a lot of the Sydney market must be at that point now, but I don't see a shadow of a sign of an upturn. Seems to me buying and renting are both financially ridiculous for most people, and the sensible thing to do is to forget about buying in Sydney. Oh wait... except for my friend's hypothetical house, of course.

Cheers,

Ghoti
Click to expand...

well we obviously are not at that point, if rent was exactly the same price as mortgage repayments then we shall see an upturn in housing demand theoretically...
 
Beej said:
Old news - already posted on this thread a couple of days ago when first announced.

And just to contrast - here's a story about 300 jobs being CREATED: http://news.smh.com.au/national/300-jobs-to-be-created-at-vic-it-centre-20080827-43nh.html

Other jobs are being created all the time as well, it's just not big news right now. How many people do you think RIO and BHP etc are looking to hire right now for example???? My current employer is hiring. I'm not discounting the reality of job losses at the moment - the economy is slowing, and remember the regulators have deliberately engineered this situation. A consequence of that of course has to be job losses and an increase in unemployment.

However, the big question STILL is this all enough for us to actually be in recession? I've been in the work force through one REAL recession and also through the tech-bust (as an investor and technology professional working in Silicon Valley in the US). This, to me, does not feel like a real recession yet.... time will tell. There's still too many sectors and companies etc still doing quite well. Remember a downturn in one sector (say auto manufacturing or discretionary retail) does not necessarily a full blown national recession make..... the workforce is 10,000,000+ - so even 50 newspaper stories touting a few hundred job losses each only adds up to an increase in unemployment of < 0.2%, assuming NO new jobs are also created at the same time in the economy elsewhere to absorb those losses.....

Cheers,

Beej
Click to expand...

The last line of that story is of interest:

The Victorian government has committed $5 million to support the construction of the 3,500 square metre centre.
Click to expand...

I wonder how many jobs would have been created had the government not decided to use $5m of taxpayer money to help fund it?

Quite clearly in the US currently, the housing sector is in a depression, autos and retailers are in recession, the financial industry is in crisis but the energy industry is still arguably booming and other industries such as technology and healthcare are hanging in there quite well. You don't need very sector of the economy to be tanking at the same time for a recession.

I think John Hussman summarises well what happens in a recession.

recessions emerge not because of a general decline in the willingness to consume, but rather because a mismatch emerges between the mix of goods and services demanded in the economy, and the mix of goods and services that the economy has been supplying. Many industries experience continued growth during recessions (even if their stocks trade somewhat lower), while other industries experience profound demand shifts. In the late 1990's, there was clear overinvestment in telecom and information technology, and these sectors suffered disproportionately during the recession that followed. In the current cycle, the overexpansion has been in housing, debt origination, and leveraged finance, so a much different group of stocks will probably be hung out to dry this time.
Click to expand...
 
Dhukka - an interesting definition/explanation of recession. Not sure I agree! To have a real recession (ie actual net economic output reduction for a prolonged perios > 6 months) I think you must have a broad slowdown across basically all sectors, and especially you need a huge slump in consumption, as most other activity (non export driven) ultimately derives off that consumption.

Re government providing cash to IBM etc, well, one of the things governments (at any level) can do and do in fact do with fiscal policy during economic slow downs is stimulate via increased spending, so there is nothing sinister or unusual in that. It helps if you run surpluses etc and have billions of $$$ invested in sovereign funds (as Australia does right now), as you can ramp up fiscal stimulus without even having to borrow! Particularly helpful if the slowdown is being caused by a credit crisis! We have not yet really begun to see the impact of this sort of fiscal stimulus.

Because Oz has so much cash on the side-lines in these government funds, plus scope to significantly loosen monetary policy as interest rates are currently high, plus the stimulus from our dramatically increased terms of trade due to the ongoing resources super-cycle, I don't think we will dip into any sort of prolonged retraction over-all. I reckon this will all go down in the end as a "growth slow-down" for a couple of years, with the *possibility* of it being labeled a mild recession, but I don't think it will end up being a bad one. The fact it is taking so long to play out seems to support my point of view at this time. Of course a complete collapse of growth in China and the corresponding resource sector impact is the "wild card" that would change everything. No one can predict the future, it's all about probabilities!

FYI - US consumer confidence UP in July (2 months in a row now): http://www.conference-board.org/economics/ConsumerConfidence.cfm

Didn't see this reported anywhere! Only bad news sells newspapers at the moment, as that is what it seems everyone wants to hear!

Cheers,

Beej
 
Beej said:
Dhukka - an interesting definition/explanation of recession. Not sure I agree! To have a real recession (ie actual net economic output reduction for a prolonged perios > 6 months) I think you must have a broad slowdown across basically all sectors, and especially you need a huge slump in consumption, as most other activity (non export driven) ultimately derives off that consumption.

Re government providing cash to IBM etc, well, one of the things governments (at any level) can do and do in fact do with fiscal policy during economic slow downs is stimulate via increased spending, so there is nothing sinister or unusual in that. It helps if you run surpluses etc and have billions of $$$ invested in sovereign funds (as Australia does right now), as you can ramp up fiscal stimulus without even having to borrow! Particularly helpful if the slowdown is being caused by a credit crisis! We have not yet really begun to see the impact of this sort of fiscal stimulus.

Because Oz has so much cash on the side-lines in these government funds, plus scope to significantly loosen monetary policy as interest rates are currently high, plus the stimulus from our dramatically increased terms of trade due to the ongoing resources super-cycle, I don't think we will dip into any sort of prolonged retraction over-all. I reckon this will all go down in the end as a "growth slow-down" for a couple of years, with the *possibility* of it being labeled a mild recession, but I don't think it will end up being a bad one. The fact it is taking so long to play out seems to support my point of view at this time. Of course a complete collapse of growth in China and the corresponding resource sector impact is the "wild card" that would change everything. No one can predict the future, it's all about probabilities!

FYI - US consumer confidence UP in July (2 months in a row now): http://www.conference-board.org/econ...Confidence.cfm

Didn't see this reported anywhere! Only bad news sells newspapers at the moment, as that is what it seems everyone wants to hear!

Cheers,

Beej
Click to expand...

Regardless of whether you agree, historically the fact is that some recessions have been called by the official bodies that make such calls, without broad slowdowns across all sectors. You simply don't need a broad slowdown across all sectors to have an 'official' recession and you certainly don't need a 'huge' slump in consumption, the last US recession is proof of that.

I agree there is nothing necessarily sinister about government spending but in the context of the previous post it was put forward as evidence of a strong economy creating jobs. My point is, is this really a sign of a strong economy if it is government subsidised? No doubt it's a positive to see jobs being created but it would be more encouraging if it were being created by private industry.

It's nice to be sitting on surpluses and hopefully the government can deploy it efficiently if need be. interest rate cuts in the current environment, as we have seen in the US, will have little effect.

Just to be clear I'm not making the case that Australia is definitely headed for recession. All the evidence to date points to a slowdown and nothing more. However, given that much of Australia's growth over the past decade has been driven by huge leverage leading to asset price inflation and we are now in a period of deflation and slowing growth, recession is a real possibility.

Yeah no doubt consumer confidence is improving, especially when US consumers see gas prices falling. Also a good report on durable goods last night bodes well for 3Q08 GDP.
 
Beej said:
Old news - already posted on this thread a couple of days ago when first announced.

And just to contrast - here's a story about 300 jobs being CREATED: http://news.smh.com.au/national/300-jobs-to-be-created-at-vic-it-centre-20080827-43nh.html

Other jobs are being created all the time as well, it's just not big news right now. How many people do you think RIO and BHP etc are looking to hire right now for example???? My current employer is hiring. I'm not discounting the reality of job losses at the moment - the economy is slowing, and remember the regulators have deliberately engineered this situation. A consequence of that of course has to be job losses and an increase in unemployment.

However, the big question STILL is this all enough for us to actually be in recession? I've been in the work force through one REAL recession and also through the tech-bust (as an investor and technology professional working in Silicon Valley in the US). This, to me, does not feel like a real recession yet.... time will tell. There's still too many sectors and companies etc still doing quite well. Remember a downturn in one sector (say auto manufacturing or discretionary retail) does not necessarily a full blown national recession make..... the workforce is 10,000,000+ - so even 50 newspaper stories touting a few hundred job losses each only adds up to an increase in unemployment of < 0.2%, assuming NO new jobs are also created at the same time in the economy elsewhere to absorb those losses.....

Cheers,

Beej
Click to expand...


New gas power station in Victoria creates 730 jobs:

http://news.smh.com.au/national/new-gas-power-station-creates-730-jobs-20080821-3z65.html
 
JOB CUTS
August:
Car components company Unidrive sacks 40 workers.
Suncorp Metway can't rule out job losses.
Fairfax slashes 550 jobs across Australia and New Zealand.
Kenworth cuts 80 Melbourne manufacturing jobs.
Ford announces 350 redundancies at Broadmeadows and Geelong. The announcement follows 600 job losses at Geelong when the engine plant closes in 2010.
Roy Morgan Research sacks 56 Melbourne-based call centre workers.
Cadbury Schweppes announces 330 jobs to go in Victoria, New Zealand and Tasmania.
Boeing to cut more than 500 Melbourne jobs within 18 months.
683 Starbucks workers axed after the closure of 61 stores.
60 workers sacked at Ardmona's Shepparton and Mooroopna canneries.
Up to 70 workers at the Victorian Department of Primary Industries axed.
Diners Club sacks 130 Melbourne workers.
24 jobs at Wangaratta textile firm Australian Country Spinners cut.

July:
Dons Smallgoods sacks 620 workers, 400 in Victoria.
Qantas to axe up to 1500 jobs, all but 100 expected to be in Australia.
Insurance Australia Group (IAG) announces 600 job cuts.
The closure of Dartmoor sawmill costs 130 jobs.

June:
South Pacific Tyres announces 587 job cuts at Somerton tyre plant.
GM Holden axes 531 job at its Fisherman's Bend plant.
About 100 Kleins Jewellery employees to be made redundant after collapse of the Dandenong South based business.

http://www.theage.com.au/national/victorian-economy-to-go-into-a-recession-20080827-43na.html?page=3
 
Victorian economy to 'go into a recession'
Mex Cooper
August 27, 2008

Thousands of recent Victorian job cuts are just the beginning with the state's economy headed for recession, according to an economist.


- Recession on way
- More dismissals
- Confidence 'evaporating'


Monash University Economics Professor Jakob Madsen said Victorians should brace themselves for more job losses and economic pain as the economy continues to slide.

"We will see a much higher increase in dismissals as we are going to go into a recession," he said.

"I think it's going to easily last a couple of years or longer. A recession historically lasts for a couple of years and I can see no reason why it would be shorter than that."

Professor Madsen said Victoria's manufacturing industry had lost its competitive edge due to the strength of the Australian dollar.

He said as the European and United States' credit crisis hit home the economy would begin to crumble.

Mr Dargavel said Victoria's role as the nation's manufacturing engine room
had seen it bear the brunt of recent job cuts
with mass sackings at Ford, GM Holden, South Pacific Tyres, Kenworth and Don Small Goods wiping out nearly 2,200 Victorian manufacturing jobs since June.
recent figures were not so rosy with the total number of full-time employed Victorians dropped by more than 16,000 from the start of the year to the end of July and the state's 4.6% unemployment rate above the national average of 4.3%, according to Australian Bureau of Statistics labour force figures.

Opposition Leader Ted Baillieu said business confidence in Victoria was evaporating.

Melbourne Institute economist Michael Chua predicted job cuts would continue for the next two months but rejected suggestions of a prolonged economic downturn.

http://www.theage.com.au/national/victorian-economy-to-go-into-a-recession-20080827-43na.html?page=3

Any comments ?
Somethings up ? :cautious:
 
dhukka said:
Don't want to detract from what is obviously positive news, however it should be noted that Santos expects to make an investment decision on the project by the end of 2009 so those 730 construction jobs won't be created until 2010 at the earliest.
Click to expand...

Fair enough but the same applies for some of the reported job losses - eg Qantas - they haven't actually got rid of anyone yet, but plan to do so via voluntary redundancies, early retirements etc as well as forced redundancies over some period of time. Also the Boeing jobs - being lost over 18 months which takes some of those losses out to 2010 as well, etc etc.

This is really glass half empty/glass half full stuff to some extent!

Cheers,

Beej
 
Beej said:
Old news - already posted on this thread a couple of days ago when first announced.
Click to expand...

Anyone notice its due to a drop off in advertising revenues............is it a case of the wrong business model or a slow down?
 

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