“Whether it is a result of contagion or trade disputes, there is growing evidence from freight flows that the economy is materially slowing. Our confidence in this outlook is emboldened by the knowledge that since the end of World War II (the period for which we have reliable data) there has never been an economic contraction without there first being a contraction in freight flows…
“There is no official definition of a “global recession”. Some define the term as under 2% growth. Others say under 3.0%. I am willing to split the difference.
“The US recession may not have started yet, but a global recession (under 2.5% growth), likely has.”
[This may seem odd, given that on a national basis recessions mean two consecutive quarters of sub 0 GDP growth, but the global economy as a whole is adaptive to a growth rate of circa 3% and when you dip below this problems tend to become self-amplifying.
Of course GDP is itself a an easily manipulated statistic, offering limited insight into the true health of an economy, ignoring, as it does, changes in asset prices as well as the amount of debt accrued and environmental damage incurred in such growth as is achieved.]
“Factory output is faltering in a number of key economies, darkening the outlook for the global economy and increasing the likelihood that leading central banks will respond with fresh stimulus.
“Global industrial production has been weakening since the start of 2018… Europe has suffered the sharpest downswing, and there is little relief in sight…”
“A steady rise in employment has been one of the eurozone’s big successes over the past six years of economic expansion. But there are signs the region’s job market may be cooling as manufacturers cut back on hiring in response to weaker global demand for their exports.
“That could place the eurozone’s already faltering recovery in peril, since it would lose the support of consumers at home just as it has lost buyers abroad.”
“The [UK] car industry suffered its worst month in more than six and a half years in May as a slump in demand weighed on production, figures show.
“Brexit uncertainty, a global trade war and a crackdown on diesel cars have led to a slowdown, according to the latest purchasing manager’s index for the sector. The PMI reading for May was 43.5, down from 48.9 the previous month. A reading below 50 signals contraction.”
“Italy needs to respect financial targets in order to maintain investor confidence, Bank of Italy Governor Ignazio Visco said at an event in Venice, Ansa news agency reported.
“Italy and the European Union are locked in a tense standoff as the coalition led by Prime Minister Giuseppe Conte seeks to avoid disciplinary action over its mountain of debt.”
“Turkey’s opposition has dealt President Tayyip Erdogan a stinging blow by winning control of Istanbul in a re-run mayoral election, breaking his aura of invincibility and delivering a message from voters unhappy over his policies…
“…economic recession and a financial crisis have eroded [Erdogan’s] support, and Erdogan’s ever-tighter control over government has alarmed some voters.”
“Donald Trump has pledged that Iran’s “absolutely broken” economy will face “major” new sanctions on Monday, as Iran countered it would take further steps to increase its nuclear programme unless Europe does more to shield it from US pressure over the coming fortnight…
“On Sunday, one person was reported dead and seven wounded in a suspected drone attack on a Abha airport in southern Saudi Arabia.”
“China’s monthly industrial output growth in May fell to a 17-year low, while retail sales have also been sluggish. According to Tang, the trade dispute with the United States, along with the ongoing protests in Hong Kong, has put the Chinese regime in hot water, and its most pressing concern is how to keep sustain its economy.
““If the U.S. really takes action to cut off the blood supply [trade], the Chinese Communist Party will not be able to hold much longer,” he said.”
“China has the strength and patience to withstand the trade war, and will fight to the end if the U.S. administration persists with it, China’s state-run People’s Daily said in an editorial Saturday.
“The U.S. must drop all tariffs imposed on China if it wants to negotiate on trade, and only an equal dialogue can resolve the issue and lead to a win-win, the newspaper said.”
“This week the yield (or interest rate) for Australian government two-year and three-year bonds went below 1% for the first time in history.
“Seven months ago the rate the government was borrowing money for two years was 2%. It has taken less than seven months for that to halve…
“That does not happen when things are strong. That doesn’t even happen when things are just OK. It happens when things are bad.”
“The [US] economy’s vital signs are deteriorating. For the week ending June 15th U.S. weekly rail traffic was 527,989 carloads and intermodal units, representing a 5.4% decline versus the same week last year.
“This means businesses are shipping fewer goods and services cross country via railroads. It also connotes business activity is in decline… Rate cuts may not stave off another recession.”
“…it is only a matter of time before the bubbles pop and the economy moves into the downward spiral.”
“The collapse in bond yields since this spring has been stark, swift and global, upending expectations that the world’s economy would be strong enough to support a return to normal monetary policy after years of easy money.
“The drop says investors expect a recession may be looming, and that central banks will have to step in with lower rates to try to forestall it.”
“Eventually, risks to global outlook overshadow world GDP growth, which could linger at 2 percent-2.5 percent or worse. World trade and investment plunges. Migration crises abound. The number of globally displaced, which has exceeded World War 2 figures since the mid-2010s, soars to record highs. A series of new geopolitical conflicts prove harder to contain.
“So where are we today vis-à-vis these scenarios? A simple answer: Moving closer to the edge.”