A year ago, Catherine Liu employed more than 2,000 people at her five Shanghai luggage-making factories. Now, as the dwindling supply of low-paid young workers forces wages and costs higher, she has 1,200 left.
“Local workers are getting much older,” said Liu, owner of Shanghai Worldwide Trading Co. “If you want to train them, they must be young. It’s very difficult to survive.”
Aging and shrinking labor pools are also poised to curb expansion across the other so-called BRIC nations that contributed almost half of global growth in the past decade. With fewer youths keeping factories going and more pensioners to support in those markets, the world economy is set to slow, Goldman Sachs Group Inc. (GS) says.
The number of people older than 65 in Brazil, Russia, India and China will rise 46 percent to 295 million by 2020 and to 412 million by 2030, according to United Nations projections. The pool of 15 to 24-year-olds, the mainstay for factories like Liu’s that drove China’s boom for three decades, will fall by 61 million by 2030, about the population of Italy.
As the BRICs slow down, global growth probably will peak at about 4.3 percent this decade and fall to 3.9 percent in the 2020s, according a Dec. 7 report by Goldman analysts. That’s prompting fund managers including Mark Mobius to invest in so- called frontier markets such as Nigeria, Vietnam and Argentina, where average annual growth is set to rise to 5.1 percent this decade, from about 4.3 percent in the previous 10 years.
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Manufacturing in U.K. Contracted Less Than Economists Forecast in December
U.K. manufacturing (PMITMUK) shrank less than economists forecast in December as demand increased in Germany and China.
A gauge of factory output based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply rose to 49.6 from a revised 47.7 in November, the groups said in an e-mailed statement today. The median forecast of 19 economists in a Bloomberg News survey was for a drop to 47.3 from an initially reported 47.6 in November. A level below 50 indicates contraction.
The sovereign debt turmoil in Europe, the U.K.’s biggest export market, has dimmed the outlook for manufacturers, and the Bank of England has said the economy may have stagnated. Markit said the average reading for the manufacturing index in the fourth quarter was the weakest in more than two years.
Manufacturing will “likely be a drag on the economy in the closing months of the year,” said Rob Dobson, an economist at Markit. “Manufacturers are currently relying heavily on backlogs of work to prop up production. This is only a temporary fix, and the trend in overall order books needs to improve if the sector is to avoid a protracted period of lacklustre performance.”
A measure of new export orders increased for the first time in five months in December, Markit said. The gain was led by demand from customers in Germany, Eastern Europe and China
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U.K. Business Confidence Drops to 3-Year Low, Signaling Slump, Lloyds Says
U.K. business confidence in the economic outlook plunged last month to its lowest level in three years, according to Lloyds Bank Corporate Markets, which said there was a 74 percent chance of a recession.
An index (LTSBBCNX) of British companies’ optimism about the economy compared with three months earlier dropped by 3 points from November to minus 23, the unit of Lloyds Banking Group Plc said in an e-mailed report released in London today. December’s reading was the lowest since January 2009.
“The results indicate that the economy will almost certainly begin the new year with a contraction,” Lloyds economists Hann-Ju Ho and Jonathan Thomas wrote in the report. “As this indicator leads quarterly gross domestic product (UKGRABIQ) growth by three to four months, it suggests that economic activity will progressively weaken during the first quarter and the start of the second quarter of 2012.”
While GDP expanded 0.6 percent in the third quarter, U.K. services output fell the most in six months in October, indicating the economic rebound lost momentum at the start of the fourth quarter. The Bank of England, which restarted bond purchases on Oct. 6 to support the recovery, forecast stagnation in the last three months of 2011 as Europe’s debt crisis dented confidence and curbed demand.
