Daily commentary: The global growth slowdown catches India and Australia

The global growth slowdown began in the second half of 2011. I flagged it as a trend last May. At that time, I was saying reduce risk to deal with the slowdown. But that was about it. For the most part, markets have shrugged off this slowing growth with commodities, equities and bonds all doing reasonably well. Only precious metals, emerging markets and European periphery stocks have seen a major correction. When I updated my view in December, my concerns were Europe, China, India and Australia. And this is still the case.

I have written a decent amount about Europe. So I won’t go into detail here except to note that Europe is in a double dip and that economic policy is slowly moving away from austerity toward growth. It’s not clear how much movement we will see and whether it will matter from a global economy perspective. On China, Hugh Hendry has a great piece out questioning whether the Chinese economic miracle can continue unabated. He is China bear and continues to see negatives there. I may review this piece at some point in the future, but I thought I’d flag it.

What I wanted to point here in the links are the downside moves in Australian housing and in the Indian economy. Steve Keen notes that Australian house prices peaked in June 2010 and they are down 10% from that peak according to the ABS data. I see Australia as a canary in the coalmine on commodity prices and the global growth slowdown because that economy has avoided recession for so long. yet the housing situation is worrying. My thinking has been that if the incipient fragility in housing turns into something more serious, then it is a harbinger for problems stored up in inflated asset and commodity prices. Note Delta Airlines buying a refinery could be a contrary indicator. I expect India to slow more abruptly than China and this seems to be occurring. Watch these two situations because Europe and China get all the headlines, but these two are important too.

That’s it. Here are the links.

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