Shaky economies and an old New England proverb

Weathering the storms, one economy at a time

Those of us who live and work in New England do so with the full knowledge that we will experience sudden and often dramatic weather changes. "If you don't like the weather, just wait a minute," so our saying goes. Starting in June of 2011, we experienced the following over a 12-month span: Three F3 tornadoes; Hurricane Irene (downgraded to a tropical storm but still packing winds and soaking rains); and a surprise Halloween snowstorm that dropped up to 18 inches of wet white cement on still fully leaved trees, snapping branches and uprooting trees and knocking out power across the region for a week. Spring this year brought us more inches of rain, then brush fires feeding on those tornado- and hurricane-downed trees, and a summer drought. And just for good measure we had a mild earthquake.

Through all of this, I've been observing the ups and downs of the world economies and specifically the impact on the global manufacturing sector. If you follow my blogs and the industry news on the ILS Web site, you get some sense of the frustration in tracking the activity in the markets that make up the industrial laser universe. You would think that a hearty New Englander used to experiencing in wildly fluctuating weather patterns would be inured to gyrations in the global economy. Functioning with a mindset conditioned to living with rapid, constant, and significant changes, however, leads one to be somewhat blasé when assessing the impact of said changes. And this is not good for an unbiased analyst.

So here is the picture for the remainder of 2012, as seen at the half-year point: expect more ups and downs as the world's various economies ebb and flow with the vagaries of some that have an impact out of proportion with their size. (By this I mean Spain and Italy, for example.) I recall attending an international conference where the casual talk was all about Portugal's economic woes - wine futures I could see, but a drop in their GDP?

The real conundrum that makes pale the problems in other regions is China. At this writing, seemingly resistant to central government stimuli, Chinese companies are having profit woes, which in turn increases the pressure on both central and regional governments to apply more stimuli to reverse the decline and return the country to previous robust growth levels. In July, Zhang Jiuhui, chief investment advisor at Great Wall Securities, predicted that China's "economic growth will be unstable for the next six or even 12 months at quite a low level." Many observers now negatively view the governments' ability to reverse an economic decline as they have in the past.

Don't get me wrong - in this case I am pulling for the government to succeed. Europe, mainly Germany, relies heavily on exports to China. Also, the impact of China's recent economic travails is now being felt here in the US, with our exports to Asia and Europe slowing as orders are delayed or cancelled.

In the US we are in the midst of a race for the White House and both candidates will make a case for "reshoring," the relocation of a company to another geographic location - more specifically, brought back to where it originally existed before it was shipped beyond borders for perceived business benefit. Now it is a buzzword for a rebuilding the economy in manufacturing, which means jobs, and in this election year jobs is a political football. A recent poll by the American Alliance for Manufacturing says that creating jobs and strengthening manufacturing is a top economic priority.

So, as a sturdy New Englander, I expect to weather these storms - just like I have all the others.

David A. Belforte

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