Is the Economic Winter here?

Early during the summer, we wrote how the global economy was scorching hot then just like the weather but winter was coming. Weather wise (unless you are in Australia or New Zealand) winter is here and it appears the global economic winter is not too far away.

View from Canary Wharf towards the City of London

Brexit can cause a global economic melt down

Will the UK leave the European Union? Well, 29 months ago the public voted to. Now there is talk of no deal, a bad deal or no Brexit at all. Any outcome will likely cause economic headwinds globally. But if there is no deal then global trade will suffer as global supply chains are all inter linked

Retail Sales growth globally have stalled

The US, the UK and the Eurozone are seeing retail sales growth slow. And 2018 will be the year of record retail closures. Even core Amazon first party online sales grew just 10% year on year and employee growth rate was slowest ever. Amazon is also offering free delivery in the US until Christmas (there is normally a $25 minimum order value to qualify for free deliver for non-Prime members). Peak Amazon or retail slowdown?

Global Trade is barely growing

Tariffs is one thing, but global trade is generally slowing. The Baltic Dry Index which is a trade indicator that measures shipping prices of major raw materials and is often seen as a global growth indicator is down some 25% over the year. German GDP fell in the last quarter due to falling exports.

Higher interest rates are hurting corporates

Corporates have piled up record debt since the recession of 2008 and as interest rates rise earnings will be hit.

IMF Nonfinancial Sector Debt
Source: IMF

Cars sales are falling virtually everywhere

The fight against diesel and generally lower availability of vehicle finance means car sales have fallen this year as compared to last year in Europe and they haven’t really grown in the US. Annual German car sales fell the most ever.

There is record employment but …

The labour participation rate is at multi-year lows. Aging population to blame? No, actually labour participation is lower than normal in the working age (15-64) population group.

The Italian Budget problem

Italy is locked in a standoff with the European Union over government spending and could spark another crisis in Europe.

Oil prices

U.S. crude has continued its longest losing streak since it began trading in New York more than three decades ago having plunged more than $20 a barrel since the start of October when it hit a 4-year high. Shortage fear worries are gone, now there are concerns of over-supply. Airline profitability is being hit significantly.

Global Slowdown

The International Monetary Fund expects global growth to slow to 2.5% in 2019 from 2.9% this year but that is still quite optimistic. Japanese and German GDP shrank in the third quarter, and Chinese GDP growth fell in the third quarter. Three of the four largest economies are now decelerating and the U.S. economy is set to contribute its highest share of global GDP since 2007 as other economies everywhere else stumble. The Economic Winter is upon us.

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