Reality of Global Economic Slowdown Hidden by Extreme Optimism

Here’s how a gradual slowdown in the global economy, something very few American or Canadian politicians are talking about, looks:

South Korea reported that in the first half of this year, exports of ships fell 25.3%, steel exports fell 12% percent, auto exports are down 1.7%, petroleum products are down 2.1%, and computer exports fell 3%. (Source: South Korea Ministry of Trade, Industry & Energy, July 2, 2013.)

The central bank of Thailand has lowered the growth forecast for its country, citing weakness in the global economy. The Bank of Thailand expects growth of 4.2% this year compared to its previous prediction of 5.1%. (Source: Bank of Thailand, July 19, 2013.)

Singapore, one of the most active container ports in the world, is facing similar issues. The country’s non-oil exports to the global economy fell 8.8% in June from a year ago. Shipments to the U.S. from Singapore declined 15.9%, and to the European Union, they plummeted 33.6%. (Source: International Enterprise Singapore, July 17, 2013.)


The situation on the other side of the global economy hints at an economic slowdown as well.

The United Nation’s Economic Commission for Latin America and the Caribbean (ECLAC) predicts Latin American countries will only grow at three percent this year—a slower rate of growth than its previous estimates of 3.5% in April. The ECLAC cited two main reasons for slower growth: Europe and China. The region is overly dependent on exports to these two economies. (Source: Economic Commission for Latin America and the Caribbean, July 24, 2013.)

On the surface, this may not sound like a big deal to many, but the reality is that an economic slowdown in the global economy will have an impact on U.S.-based businesses that are operating globally.

McDonalds Corporation (NYSE/MCD) is a great example of an American company witnessing the slowdown in the global economy firsthand. For the second quarter of this year, the company reported its global sales rose only one percent from a year ago—and it expects global sales to remain challenging throughout the year. (Source: McDonalds Corporation, July 22, 2013.)

It’s only a matter of time before we start to hear more about the economic slowdown in the global economy. Currently, the reality is hidden by extreme optimism. I am watching all of this very carefully, and I caution investors—beware: the global economic slowdown will eventually hit the earnings and stock prices of the 40% of S&P 500 companies that export abroad.