The economic-related statistics being released on an almost daily basis are gruesome…and the chances of a global recession are becoming imminent.
How bad is global trade?
Talking numbers, between 1983 and 2008, on average, global trade grew at about six percent per year. Now this rate is down to just three percent. Here’s something else worth mentioning: this year the World Trade Organization (WTO) is expected to reduce its forecast for global trade for a second time—the first time that’s happened since 2009.
To provide some perspective, the chief economist at the WTO said last week, “It’s almost like the timing belt on the global growth engine is a bit off, or the cylinders are not firing as they should.” (Source: Wall Street Journal, September 14, 2015.)
Chinese Economy to Lead Global Economy into Economic Slowdown
Keep an eye on China, as the second-biggest economy in the world is slowing down very quickly.
The Caixin Flash China General Manufacturing Purchasing Managers’ Index (PMI), a key indicator of the Chinese manufacturing sector, dropped to a 78-month low in the last month. (Source: Markit Economics, September 23, 2015.) The index sits at 47.0, down from 47.3 in August. Any value below 50 on the PMI suggests contraction in the manufacturing sector.
Manufacturing output, new orders, and employment in China are all dropping at a concerning pace. Not too long ago, China was considered the “factory of the world.” The softness in the Chinese economy says demand in the global economy is in the slumps.
Should You Be Worried About the Global Recession Headed Our Way?
Dear reader, don’t listen to the mainstream media; it will sell you on the idea that the U.S. economy is improving. Don’t buy into this narrative. It’s very misleading.
For months I have been telling you the numbers don’t add up. Our economy can’t grow when the S&P 500 companies are experiencing back-to-back quarterly declines in earnings growth and revenue is contracting.
The chart of the Dow Jones Industrial Average below tells the real story. The stock prices of 30 of America’s largest companies are down 12% since May. The stock market is a leading indicator of what is to happen six to 12 months into the future. Right now, the market is saying there’s trouble ahead.
Chart courtesy of www.StockCharts.com
In this global economy, the U.S. is no longer an isolated nation, as almost 50% of the S&P 500 companies now derive revenue outside of the U.S. For the U.S. economy, the global recession that appears to be headed our way will be detrimental.