Daily Commentary: On The Global Growth Slowdown

There was a lot of bad economic data outside of the United States today. Europe is awful. Ireland is back in recession as the global growth slowdown has hit exports there. They join Belgium, the Netherlands, Italy, Portugal and Greece in recession in the euro zone. Even Germany printed a sub-50 PMI number. Denmark, outside of euro land, has its own problems with the central bank now warning about sky high household debt levels there.

I continue to expect weak industrial production and export numbers from Germany. Their major export markets are all slowing including China, where they thought they could diversify away from the euro zone. Unless we see a fall in domestic business/household savings, the lower German exports will translate into negative federal budget surprises. You can see here for double dip prediction: "Spain’s debt woes and Germany’s intransigence lead to double dip".

It’s taken two years for us to get to the euro zone double dip but the macro case was clear in 2010. Let’s hope it’s shallow. And by that I mean that policy makers will wake up to the debt deflationary course now taking place in Europe. I should point out that this is unlikely as the Germans are still patting themselves on the back for becoming a sort of economic model for others to follow. See the Spiegel article below. And be very sceptical whenever any country uses recent growth to demonstrate the superiority of its economic system. We saw this in the US before the bubble burst.

The Chinese slowdown is worrying as well. There is a lot of hard landing chatter out there. I suggest you read Ed Chancellor’s FT article on corruption and malinvestment in China for a flavour of the problems in China right now. As some of you know (from my gold level articles) I see Australia as a canary in the coalmine here because of the tie to China and commodities and because the house bubble is already deflating.

I have already predicted a sizable slowdown in growth in the second half of 2012. Coupled with declining budget numbers, this bodes ill for record corporate margins and therefore represents a headwind for shares.

That’s it. Here are the links.

  • FedEx global economic view darker, shares drop | Reuters

    A strong holiday season and mild winter helped FedEx Corp beat Wall Street’s profit forecast, but the world’s No. 2 package delivery company warned that it had lowered its outlook for the rest of this year due to tepid economic growth.

  • Denmark’s Record Private Debt Load Triggers Central Bank Warning – Bloomberg

    Households in the AAA rated nation increased their debt burdens to 310 percent of disposable incomes in 2010, the world’s highest ratio, according to Exane BNP Paribas. While the debt is backed by the world’s second-highest pension savings rate after the Netherlands, those assets are "locked shut," Bernstein said. The central bank has argued that failure to address the risks may jeopardize the stability of Denmark’s $470 billion mortgage bond market.

  • Renter Beware: Think Twice Before Having a Bank as Landlord | Lawyers.com Blog

    problems of two families living in bank-owned apartment buildings. Among them, bank-landlords that: Failed to maintain the building Didn’t pay utility bills Rented apartments that didn’t meet local and state building codes Didn’t provide tenants with a way of contacting them "In many cases it’s difficult to find a real, live human being that’s going to take responsibility for that property,"

  • Payday Lender Political Donors Hidden in Corporate Names – Bloomberg

    Creation of a limited liability company to avoid disclosure is the latest tool big donors and corporations are employing to shield their political involvement.

  • Ireland back in recession as global slowdown hits exports | Business | The Guardian

    GDP fell 0.2% in the final quarter of last year to put Ireland officially into recession, alongside Belgium, the Netherlands, Italy, Portugal and Greece

  • ‘We Need To Learn from Germany’: How the German Economy Became a Model – SPIEGEL ONLINE – News – International

    As America groans under the aftereffects of the financial crisis and recession, Germany’s economy continues to steam ahead, even becoming an object of study. "Americans, including policymakers, are increasingly taking an interest in Germany’s reforms and what it managed to accomplish in the last 10 years," says Michael Spence, an American economist and the 2001 winner of the Nobel Prize in economics.

  • Corruption threatens China’s future – FT.com

    Premier Wen Jiabao has talked repeatedly of the need to address China’s "imbalanced, uncoordinated, and unsustainable development". Yet its growth continues to depend on increasing amounts of investment. Last year fixed-asset investment accounted for 90 per cent of economic growth. The trouble is that much of the money has been frittered away on trophy infrastructure projects, such as the country’s expensive high-speed rail network, with low prospective returns. Mr Wen may fret but if investment were to stop expanding, China’s growth rate would slow dramatically. Beijing is holding a tiger by the tail and doesn’t dare let go.

  • On Journalists Moonlighting as Big Ticket Speakers for Financial Firms « naked capitalism

    We are much easier to manipulate than we want to believe. Social psychologist Robert Cialdini, in his classic book: Influence: The Art of Persuasion, reported that people who received a gift as minor as a can of soda were more receptive to a sales pitch. There’s a reason drug companies would give doctors pens, note pads, and desk toys.

  • EconoMonitor : Dan Alpert’s Two Cents » Consumer Credit Growing at Highest Rate in Past Decade: Unhealthy and Unsustainable?
  • When journalists take money from Wall Street | Felix Salmon
  • The Real Leadership Lessons of Steve Jobs – Harvard Business Review

    His saga is the entrepreneurial creation myth writ large: Steve Jobs cofounded Apple in his parents’ garage in 1976, was ousted in 1985, returned to rescue it from near bankruptcy in 1997, and by the time he died, in October 2011, had built it into the world’s most valuable company. Along the way he helped to transform seven industries: personal computing, animated movies, music, phones, tablet computing, retail stores, and digital publishing. He thus belongs in the pantheon of America’s great innovators, along with Thomas Edison, Henry Ford, and Walt Disney. None of these men was a saint, but long after their personalities are forgotten, history will remember how they applied imagination to technology and business.

  • Jonah Lehrer on the Achilles’ Heel of Overeaters | Head Case – WSJ.com

    If trends continue, it’s estimated that by 2030, the obesity epidemic will account for nearly 20% of health-care spending, five times what’s spent on cancer.

  • Comments are closed.

    This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More