Boom/Gloom Index warns of rising Austerity risk

Index Jul10.pngThe latest IeC Boom/Gloom Index © is showing a further rise in its austerity reading (red line). This is not good news for likely future chemical sales. It is one of a number of leading indicators – housing and auto sales, unemployment, bank lending etc – which are all pointing to a potentially sharp slowdown in demand during H2.

This is in sharp contrast to last year, when the Index was highlighting a growing belief in the investment community that the ‘green shoots’ of recovery were becoming visible. As noted last month, this belief has now totally disappeared, and it therefore no longer features in the chart.

The Boom/Gloom Index (blue column) is still, however, in the same range that has held for over a year. Many investors are dangerously complacent, believing that the major falls now taking place in global stock markets, are only a necessary ‘correction’. Sentiment has clearly not yet adjusted to the rapidly deteriorating fundamentals.

But in the blog’s view, the odds that we are entering the 3rd stage of the downturn, where we suffer a drawn out fundamental downtrend, are now rising quite sharply.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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