UK construction machinery firm JCB has said that it will cut 400 jobs around the world, mostly due to a massive slow down in business in Russia, China and Brazil.
This is a horrible sign for three of the biggest economies in the world.
“In the first six months of the year, the market in Russia has dropped by 70%, Brazil by 36% and China by 47%,” said JCB CEO Graeme Macdonald in a press release.
“Parts of Europe are also struggling, with France down by 26%. Even the strong growth in the UK and North America has softened due to a fall in market confidence over the summer, which has been prompted to an extent by low oil and commodity prices in countries which depend on these resources to drive economic growth.”
JCB makes construction and agricultural machinery, and competes with US rival Caterpillar for much of that business. Caterpillar said in its second quarter earnings statement that continued economic weakness in China and Brazil “haven’t helped confidence.”
Brazil, Russia and China were all countries that consumed and exported a ton of commodities like steel, copper, and oil. Commodities prices started falling at the end of last year. The Bloomberg Commodities Index has fallen by almost 26% over the last year.
China is especially dependent on new buildings being built to drive its economy. That has led to over-building, with the real estate market slowing in recent months.
Russia’s slowdown is largely to do with the slumping oil price, and sanctions the world placed on it after Russian troops moved into Ukraine.
Brazil is another story. It’s a big commodity exporter, so the commodities price plunge has been rough on the country. It’s also going through another domestic disaster, as a corruption scandal at $US40 billion quasi-state owned oil company Petrobras has reached the highest levels of the Brazilian government.
Now President Dilma Rousseff’s approval rating is sitting at 7%, the country’s currency has lost a quarter of its value since the start of the year, and inflation is around 10%.
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