Keep an Eye on the GDP

The threat of a global economic slowdown is real and could be a real threat to GDP growth everywhere. And, as economies are integrated, a slowdown in one country could impact the economy elsewhere. For example, the slowdown in the U.S. is impacting growth in China.

Now, we hear that Japan saw its economy report a decline in the second quarter of 2.4% for the first time in a year. Japan had been on a six-year growth cycle, but the slowing brings up bad memories of the country’s long recession in the 1990s. It is clear that Japan is feeling the slowing domestically as well as from the rest of the world.

The impact of the slowing world economies was shown by data that pointed to a 67.4% decline in Japan’s trade year-over-year as numerous businesses are under pressure.

China, which is a key economy for the world, is also seeing some slowing. The country’s GDP continues to be strong, with year- over-year growth of 10.1% in the second quarter, according to the National Bureau of Statistics (NBS). The reading was down from the first-quarter GDP growth of 10.6%. Consensus estimates for the third quarter call for GDP to expand by 10%. The Asian Development Bank (ADB) predicts China will grow by 9.9% in 2008, down from the previous forecast of 10%. For 2009, AOB estimates GDP growth will fall to 9.7%.

These GDP readings should be monitored, as they have and will continue to impact growth in the U.S. and other world economies. The threat of a world recession may not happen, but the slowing is a reality. We have already seen the impact on the demand for oil, which has been declining.