The Good News Blog

Headline writers often like to smuggle in the old "it's official" tag to add weight to their stories, but this one from Friday does seem about as official as you can get these days on the economic front. According to finance chiefs from the G7, which comprises the United States, Britain, Canada, France, Germany, Italy and Japan, the global economy may be past the worst phase of a recession, with prospects now looking good for a "weak" recovery by year's end. The Group of Seven leaders did add a few caveats to that judgment, however, but their main message was certainly a great deal more upbeat than even in February, when they warned that the severe downturn would persist through most of 2009 and made no mention of promising signs of stability. (Hat Tip: Positive Economic News.)

This blog has argued for some time that not everything one sees in the news should be taken as the whole economic story. The local news industry is itself is facing challenging times in 2009, and it’s probably natural that even its brighter voices might occasionally fall prey to the temptation to read into the bigger picture the specifics of their own situation. An American commentator recently made much the same point in a thoughtful business piece that deserves to be read on the strength of its rhetorical headline alone: Is Negative Economic News Contributing to Negative Economic News? Well, if you put it that way … In his article, writer George Korda looks at whether the news media is reporting or driving the grim economic news. Pondering this question, he quotes an interesting scholarly paper from 2004: “The news media affects consumers’ perceptions of the economy through three channels. First, the news media conveys the latest economic data and the opinions of professionals to consumers. Second, consumers receive a signal about the economy through the tone and volume of economic reporting. Last, the greater the volume of news about the economy, the greater the likelihood that consumers will update their expectations about the economy.” In other words, the media report bad economic news and gloomy forecasts in 2009. Consumers and businesses respond by hunkering down and closing their wallets. The media dutifully reports that consumers are hunkering down and closing their wallets, prompting consumers and businesses to hunker down even more, which the media reports. Consumers and businesses respond by … well, you get the picture.

Ignore the stock markets, turn away from those unemployment figures, and ask yourself: Is the world’s dominant economy headed down for the next 12 months – or up? Up, according to another thoughtful recent instalment of Christian Science Monitor’s New Economy Blog, which looks at 90 years’ worth of business cycles — a period that has seen 17 recessions — and concludes that the medium-term outlook is actually pretty darn good. Also of stateside interest: Economic confidence among American small business owners has just seen its largest jump in nine months as fewer owners see the economy getting worse and more believe conditions are improving for their own operations, according to the latest Discover Small Business Watch. The monthly index increased more than six points, rising to 78.2 in March from 71.9 in February. Not bad.

If Kiwis must pore over news reports on the economic climate, the logical place to start ought to be with those originating from Australia. Unfortunately for some, many of the reports coming from our largest trading partner don’t fit the doom-ridden media narrative some are slightly fond of consuming right now. Take this upbeat broadcast from the ABC, an interview with the network’s economics correspondent Stephen Long on the surprisingly positive news of Australia’s recent trade surplus of more than $2 billion. The report also looks at the apparent end to the slump in exports and other doomy trade numbers. As Long says, “The market economists, most of whom once again got it wrong, you might as well rely on a fortune teller, were tipping, the medium forecast was for an increase in the surplus of about $700-million after seasonal adjustment — slicing and dicing for the seasonal factors. And instead we got $2.1-billion surplus in February. Now if that was all driven just by a collapse in consumption then we might have a problem Houston, but instead we have seen some tentative signs of a turnaround in exports.” While it was true to say discretionary spending for the period has been down, it was nevertheless “very, very positive that we have seen also an increase in capital goods coming into the country, which might suggest that we are actually gearing up for some production.” And as goes Australia, of course, so do many New Zealand companies.