Chin Up in the Downswing

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Chin Up in the Downswing: Parallels to Great Depression Called Overblown, Topshop Opening Shows Retail Vitality, Chinese Manufacturing Rebounding

April 02, 2009 05:15 PM
by Anne Szustek
The numbers indicate that this recession is nowhere nearly as dire as the 1930s, argues a Federal Reserve researcher. Topshop’s U.S. opening shows people are still excited about buying clothes and China’s manufacturing output is up for the first time in six months.

This Recession Is Not the Great Depression, Says Federal Reserve Research Associate

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Financial pundits continually mention that the current recession is the worst economic downturn since the Great Depression. But as Charles S. Gascon writes in The Regional Economist, a publication of the St. Louis Federal Reserve, “fortunately, the difference between the ‘worst since’ and ‘as worse as’ the Great Depression is vast.” He points out that for a start, this recession would have to go on for two and a half more years before it would match the Great Depression. And the Great Depression’s first-year numbers are substantially bleaker than those for the first 12 months of this recession: “Per capita income declined by over 10 percent during the first year of the Depression, while current per capita incomes (before adjusting for inflation) have remained stable,” Gascon writes. “Similarly, employment declined by 5.6 percent during the first year of the Great Depression, but declined by 2.2 percent in the first year of the current recession.” He also writes that what he calls a “‘historic’ undertone” in economic reporting has exacerbated the public’s doubts about the economy.

Topshop Opening Shows Cheap-Chic Retail Still Trendy

Topshop, the British fashion chain where A-list celebs and destitute art students alike scour the racks for $40 dollar dresses, made its first foray into the American market today with the opening of its four-story store in New York’s high-rent SoHo neighborhood. If the recession is restricting fashion budgets, there was no sign of it as shoppers lined up for blocks hours in advance of the store’s opening. While Topshop head Sir Phillip Green took a wait-and-see attitude before confirming the chain’s potential expansion, he told the BBC, "I would like to think we could have maybe 12 or 15 flagship stores in the US … I would like this to be the platform for the next bit of our growth.”

Other cheap-chic retailers have done well during the past year; Swedish chain H&M, while reporting a 12 percent decline in net profits for first-quarter 2009, still plans to press ahead with its plans to open 225 more stores this fiscal year. Inditex, the Spanish company that owns Zara, posted a 10 percent increase in sales for the 12 months leading up to Jan. 31.

China Manufacturing Output Grows

China’s Purchasing Manager’s Index, a measure of manufacturing output, went to 52.4 in March, up from 49 in February. This was the first monthly increase in six months. Indices of 50 or higher signal growth, suggesting that the country’s 4 trillion yuan ($586 billion) stimulus package is having a positive effect. StreetInsider.com writes this “this news could support commodity related stocks like United States Steel Corp., Rio Tinto, Freeport-McMoRan, Arch Coal Inc.,”  as well as “for shippers like DryShips.”
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