Here's The Argument That The Entire World Economy Is Starting To Go Bad
The stock market has been weak lately, and commodities have been getting crushed.
Does this mean that the global economy is really slowing down hard?
Maybe.
Recent U.S. economic data has been disappointing, especially in the realm of housing, which is what the U.S. bull case is all about.
In Germany, dubbed the strong-arm of Europe, economic sentiment just fell.
And growth has begun to slow in China – still considered a global growth engine – as it continues to crack down on corruption, property prices, and shadow banking. China's plan to shift its economic model away from exports to domestic demand led growth has also contributed to the lower growth rate.
Here's a quick look at some key data emerging from around the world:
- Housing, which has been a huge part of the economic recovery, is also showing signs of stalling. Building permits are down, homebuilder confidence is down, foreclosure starts are up, and capacity constraints among mortgage lenders are also impacting the recovery.
- America's manufacturing Renaissance also looks to be a way off. The Empire Fed manufacturing survey fell to 3.05 in April, missing expectations. This morning we saw the April Philly Fed fall to 1.3, with the unemployment sub-index falling to -6.8.
- Retail sales unexpectedly fell 0.4% in March. Nomura pointed out that the downward revisions to sales in the last two months showed that "consumer adjustment to lower disposable income at the start of the year has begun." Consumer confidence also missed expectations and fell to 72.3 in April, from 78.6 in March.
- And of course there is the jobs report, which showed that only 88,000 new jobs were created in March, very shy of expectations for 190,000. The unemployment rate fell to 7.6% but this was because of a decline in the labor force participation rate.
- On top of all this, there's the sequester, which has only just gotten going.
Europe
- Germany has seen some positive data, but economic sentiment tumbled to 42.
- In the United Kingdom, joblessness climbed by 70,000 to 2.56 million from December through February. The unemployment rate climbed to 7.9%. Moreover, Retail sales, including fuels, fell 0.7% on the month in March, and 0.5% on the year. And next week's GDP data will tell us if the U.K. has entered a triple-dip recession.
- Chinese GDP slowed to 7.7% in Q1, missing expectations of 8% growth. Industrial production, manufacturing (as represented through PMI) and exports also missed expectations.
- The government's crackdown on corruption by way of 'gift giving' has impacted retail sales, especially the catering industry.
- Latest data also showed that Chinese home prices were up in 68 of 70 cities surveyed. First-tier cities posted a huge rise in home prices. Policymakers are likely to continue with tightening measures to limit a rebound in property prices and shadow banking.
Bottom line: In the three most important economic regions, there are signs of flagging all over the place.