Economic conditions in the U.S. economy may be improving slightly, but the global economy is on the verge of witnessing an economic slowdown—and a possible recession. Key indicators are flashing red signals and warning of trouble ahead for the global economy.
In these pages, I have written rigorously about how the main economic hubs of the global economy are witnessing an economic slowdown, with the eurozone and Japan in an outright recession. The Chinese economy is slowing down, and emerging market economies are now starting to show concerns, as their troubles are quickly brewing.
This week, the central bank of South Korea cut its interest rates to 2.5% from 2.75%. The main reason for this cut in rates was deteriorating exports. In March, industrial output for the country declined 2.6% from February—the biggest decline in a year.
Similarly, central banks from countries like India, Taiwan, and the Philippines may do the same and cut interest rates to boost their exports and economies.
Emerging market economies export to developed nations in the global economy. If these emerging markets experience an economic slowdown, it will mean that demand is weak in the developed countries.
Other key indicators, like industrial metal prices, are reaffirming the economic slowdown.
Consider the price of aluminum, a metal used in many different technologies. On the London Metal Exchange (LME), aluminum traded for about $2,100 per ton at the beginning of 2013. Fast-forward to today, and the price has declined almost 12% to around $1,850 per ton. (Source: London Metal Exchange web site, last accessed May 9, 2013.)
Likewise, other industrial metals, such as copper, are signaling an economic slowdown or even a recession ahead in the global economy. The price of copper has declined roughly 13% since the beginning of the year.
The decline in corporate earnings and gross domestic product (GDP) in the U.S. may be one thing, but I am worried about higher unemployment and more misery for Americans who are already struggling.
The recession we witnessed in 2008 was a result of a U.S. domestic banking system on the cusp of collapse because of our housing bust. But this time around, the problems are coming from the global economy. Be very careful if you are heavily involved in the stock market.
What He Said:
“I see a deal when it’s a deal. And right now there’s a good ‘for sale’ sign flashing on gold bullion and gold producer shares. In fact, after peaking at the $690 an ounce level earlier this year, gold could be a bargain at its current price of around $650 per ounce. As a reader, you are undoubtedly aware of my negative stance on the general stock market and the U.S. economy. As the economic problems continue to brew in the U.S., as these problems develop into others, and as they are finally exposed, what other investment but gold will worldwide investors turn to?” Michael Lombardi in Profit Confidential, March 14, 2007. Gold bullion was trading under $300.00 an ounce when Michael first started recommending gold-related investments.
Emerging Market Economies Indicate Economic Slowdown for Global Economy was last modified: May 10th, 2013 by Michael Lombardi, MBA
Michael Lombardi founded investor research firm Lombardi Publishing Corporation in 1986. Michael is also the founder of the popular daily e-letter, Profit Confidential, where readers get the benefit of Michael’s years of experience with the stock market, real estate, economic forecasting, precious metals, and various businesses. Michael believes in successful stock picking as an important wealth accumulation tool. Michael has authored more than thousands of articles on investment and money management and is the author of several successful investing publications,... Read Full Bio »
Forecasts Aug. 29, 2015
Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.
Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.
Estimates Aug. 29, 2015
Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter)