By John Richardson
DOW Chemical’s Andrew Liveris has changed his views on China as a result of an economic slowdown that seems to have taken many people by surprise.
“China’s economy has continued to decelerate as European exports suffered,” said Liveris, as the company last week announced a 34 percent fall in profits year-on-year in Q2 2012 to $649m (€526m) on 6 percent lower comparable sales of $14.5bn.
And he warned on China that “we will likely linger around the current level until broader measures taken by the government to inspire domestic growth in investment and consumption take hold.
“China will not snap back quickly. It may be late this year when it gets back to 8% growth. Right now it is probably 3 or 4, to 5% at best.”
When the company announced its Q1 2012 results back in April, Liveris had said: “China is stabilising and growth is likely to accelerate later this year as their government keeps shifting its policies to inspire and incentivise domestic growth.”
We warned at that time that growth looked as if it was decelerating.
BASF CEO Kurt Bock (see above), on last week’s release of his company’s Q2 results, said: “At the beginning of the year… we could not have anticipated that the Chinese growth engine would start to stall.
“In the second quarter our sales in Asia decreased in local currency terms – as they did in the first quarter of 2012.”
(BASF reported a mixed set of financial results for the quarter. For example, overall sales volumes rose, but volumes in chemicals fell)
The company added: “The economic developments in the past months and a look in our order books have led us to become more cautious about our expectations for the global economy in 2012. This means that we now expect the following business environment for the full year (previous forecast in parenthesis):
• Growth of gross domestic product: 2.3% (2.7%).
• Growth in industrial production: 3.4% (4.1%).
• Growth in chemical production: 3.5% (4.1%).
• An average euro/dollar exchange rate of $1.30 per euro.
• An average oil price of $110/barrel in 2012.”
BASF isn’t quite spelling it out in capital letters and so we will: GLOBAL GROWTH OF 2.3 PERCENT WOULD BE ESSENTIALLY A RECESSION.