The decline in the number of US made capital goods created turmoil in the entire world economy, until it was realized that the state of affairs is not all that gloomy. Even though the world has seen the largest decline in the capital goods industry, the consumer confidence has been on a big high. However, this becomes no reason to ignore such a tremendous decline. This huge decline has indicated the slowdown of economic growth, which is indeed a crucial factor for any nation, any economy. It is a cautionary note for the economies and one must pay proper attention to these signs.
Justifying the decline:
A decline is the non-defense capital goods, is a big reason to worry. Demand for the core capital goods is continuously declining as per the Commerce Department. Although the increase seen in the consumer confidence is an optimistic sign, yet this decline has been a true indicator of the slowdown in the activity. The economists worldwide were pained to see their prediction of 0.6 percent gain fall wrong. The main reason for such a decline is being linked to the slowing growth in China as well as the euro zone. One should not forget after all we are all connected. Activities in one place are bound to affect the other.
Increasing costs:
Growth for all the economies is a must no matter whether it is a developed one or not. Such a decline in the economic factors is a matter of deep concern. All the necessary mandates should thereby be adopted in order to make the situation on the global level better. This decline is also making the gross domestic product situation worse for the nation. The inventories of the capital goods are increasing in numbers, the cost of maintain them in increasing manifolds. To cover these inventory costs another matter of concern.
Global impact:
GDP on a low, increasing inventories, economic slowdown all are majors reasons, which are making the economists go frantic. United States paves the way for all others. This economic slowdown in the nation will affect all the other nations as well and such a slowdown in the economic activity is suicidal for most of the nations. The development prospects for the Less Developed Nations decline greatly, when such economic slowdown is witnessed by the world. These negative embodiments have a huge trickledown effect and make the situation go bad to worse for the LDCs.
Policy framework:
All the policies have to be so framed keeping in mind these intricacies. The situations have to be improved in order to increase the demand of the capital goods. The great amount of orders has also been cancelled and this has further added fuel to the fire. The demand for the machinery is also on a low and this has worsened the situation further more. Manufacturing is also slowing down owing to the current economic scenario. The new policies have to be skillfully crafted, taking into consideration the urgency in the situation, understanding that this measure affects the entire globe.
Decline in demand of all goods:
The capital goods industry is already on a low; in addition to this, the demand for the consumer goods has also declined making the economic slowdown even greater. Although demand for the aircrafts has somehow cancelled the slowdown effect but it remains a major concern.
Economic situation of any nation is defined by the number of economic activities it is engaged, more the better. However, such slowdowns in the economic activities turn the entire zone upside down.
Summary: The decline in the demand for the capital goods made by the US has affected the entire globe and has become a cause of worry. This has to be addressed properly before the economic slowdown turns from bad to worse.
