Crisis means change in consumer spending habits

Green shoots of recovery seen even as crunch prompts new era of thrift, reports Euromonitor International ONE year on from the collapse of Lehman Brothers in September 2008, the world is still in the depths of a major economic downturn but there are signs of emerging green shoots of recovery in selected countries, while others are likely to experience protracted economic downturns and much slower rebounds. A double-dip recession is also a downside risk in some major developed economies. Government stimulus packages and central bank policies on an unprecedented scale have fuelled the recovery and prevented a more severe downturn. However, the side effects of the crisis will be felt in some countries for many years to come as government budget deficits and debt levels have soared to record levels. The USA, for example, is expecting a general government budget deficit of 11.2% of GDP in 2009 following the US$787 billion stimulus package introduced in February 2009. ?Emerging economies, led by Asia Pacific and particularly China, are leading the global economic recovery. While Chinese growth has slowed, Q2 2009 annual GDP growth was 7.9% after Q1 2009 growth of 6.1%, hugely significant on a global level when most economies are still contracting. However, there are concerns about the sustainability of China's recovery following rapid credit growth in H1 2009 and the dependence of the recovery on the government's stimulus package since November 2008; ?The eurozone's two major economies, France and Germany, both surfaced from recession in Q2 2009 with quarter-on-quarter growth of 0.3%. Stimulus packages boosted spending while industrial production and exports also improved. Japan, the world's second largest economy, also came out of economic recession in Q2 2009 with surprise growth of 0.9% over the previous quarter. The recovery in China is boosting demand for Japan's exports while government incentives such as cash handouts are spurring private consumption. However, the economy is experiencing deflation with six consecutive months of decline in annual inflation since February 2009; ?In the USA, UK and other developed economies, economic growth levels are still contracting but at a slower pace, which suggests that the worst of the downturn could be over. The US economy declined by 0.3% over the previous quarter in Q2 2009 and the UK by 0.7% (following five consecutive quarters of negative growth). However, both economies are battling rising unemployment, which is a lagging indicator, with the UK unemployment rate hitting a 14-year high by July 2009 at 7.9%. Prospects for recovery are split with emerging economies to continue leading global growth: Emerging and developing economies are forecast to rebound to 4.7% growth in 2010 after growth of just 1.5% in 2009. The IMF projects annual Q4 2010 growth at 5.1% from Q4 2009 growth of 3.3%. Advanced economies are to experience a more prolonged recovery particularly as their financial systems were heavily involved in the global financial crisis. These economies overall are estimated to contract by 3.8% in 2009 with a minimal rebound of 0.6% in 2010. The IMF expects Q4 2010 annual growth of 1.3% for developed countries compared to a contraction of 2.2% in Q4 2009. However, forecasts are subject to revision and there is a risk that advanced countries will experience a double-dip recession as private consumption is expected to remain muted while consumers revert to saving. Governments will likely introduce stringent austerity measures in the medium-term to bring government debt under control, which will weigh on consumer confidence and expenditure into the mediumterm. One key downside risk is unemployment (see Graph 3). As a lagging indicator unemployment continues to rise after a recovery is underway. With unemployment high and rising in many countriesNike React Element