“The rules and models that economists have relied on for decades seem to be failing. With interest rates still stuck near zero we no longer have the ammunition we once did to confront any recession. To top it all off, China and the rest of the emerging and developing world are slowing even more markedly than the West.
“The engines that powered the world for the past decade are faltering. The odd thing is that this has garnered so little publicity, though given that there is so much else going on to distract us perhaps that’s no surprise… Everyone is slowing but some more than others.
…in recent months the main thing worrying importers and shipping merchants is not Brexit but the fact that their warehouses are no longer filling up with goods from overseas. The ships coming into port are not so heavily laden, air cargo holds are increasingly empty. Global trade is grinding to a halt.
Again, the conventional wisdom is that this is down to the US-China trade war, but while that has affected the nature of some trade routes, forcing China to start importing its soybean from elsewhere, it does not explain why trade is falling globally.
So what is going on? Well, one possibility is that China’s almighty debt bubble is finally deflating, or even imploding, but don’t expect Beijing to let on about it for some time…
The scariest explanation is that in trying to solve the last financial crisis we fuelled a deeper malaise in global economics… The bad news is that economics as we knew it seems to be broken. There’s no guessing how or when we can put it back together again.
“China’s economic growth slowed more than expected to 6.0% year-on-year in the third quarter, the weakest pace in almost three decades, hit by soft factory production amid a bruising Sino-U.S. trade war and lackluster demand at home…
“China’s trading partners and investors are closely watching the health of the world’s second-largest economy as the trade war with the United States fuels fears about a global recession.”
“China’s $13 trillion economy is slowing and indicators showing that range from freight shipments to factory power generation and from employment to expenditures on entertainment.”
“According to Prachi Mishra, the chief economist at Wall Street brokerage Goldman Sachs, her analysis indicates that consumption [in India] has been falling since January 2018, which is much *before* [my emphasis] the end August 2018 default by IL&FS which triggered the liquidity crisis for NBFCs.
“She said the fall in consumption is responsible for a third of the overall dip in overall growth, with the global slowdown coupled with funding constraints.”
“Singapore exports shrank for the seventh month in a row as global trade tensions continued to bite. Non-oil domestic exports (Nodx) fell by 8.1 per cent last month…”
“Japan’s exports probably shrank for a 10th straight month in September, a Reuters poll found on Friday, in a sign that slumping global demand and the U.S.-China trade war was continuing to weigh on the nation’s shipments…
“Exports in September are expected to have declined 4.0% from a year earlier, the poll of economists showed.”
“Australians have the world’s second-largest household debts. We know it, we worry about it, and there is increasing evidence it is changing our way of life.
“Hovering around 120 per cent of GDP — that is everything the nation produces in a year — Australia’s household debt is second only to Switzerland…”
“The Bank of England’s credit conditions survey shows that business lending remained more or less flat as a pancake for the three long years after the EU referendum. That’s changed and not in a good way.
“The latest update shows a decline in the third quarter of 2019 which is expected to accelerate during the current quarter.
“If lending performs in line with expectations for the final three months of 2019, it will show the sharpest decline since the run up to the financial crisis.”
“Britain’s department stores are in crisis after suffering the biggest fall in sales since the depths of the 2009 recession. Sales in department and other non-specialized stores were 2 per cent lower in the third quarter of the year than in the same period in 2018, according to the Office for National Statistics.
“The sector has suffered 12 consecutive months of sales decline.”
“Germany on Thursday slashed its growth outlook for next year, saying it expects trade conflicts, Brexit and other sources of uncertainty abroad to continue weighing on the economy…
“The first recession in nine years marks the end of a post-2008 golden decade for Europe’s largest economy…”
“The European Central Bank’s latest stimulus package will not significantly help to bring inflation back to target, according to economists in a Reuters poll who said the risk of a euro zone recession in the next two years has increased.”
““The package is unlikely to do much good for the real economy. With short- and long-term interest rates already extremely low, it does seem we are getting to the limits of what the ECB can do,” said Jack Allen-Reynolds, senior Europe economist at Capital Economics.”
“President Mauricio Macri’s re-election chances have suffered another blow, after the International Monetary Fund downgraded its forecasts for Argentina on Tuesday, predicting the country’s economy will contract by 3.1% in 2019.
“The institution also predicted in a new report that Argentina’s runaway inflation will close out the year at 57.3%.”
“South Africa faces a third day of power cuts, with state-owned utility Eskom warning that outages will be bigger than previously expected after it lost more generation capacity.
“Breakdowns at a number of its generating units have forced Eskom to ration power since Wednesday… Blackouts earlier in the year were blamed for a sharp contraction in economic growth.”
“Demonstrators and police clashed in Lebanon on Thursday as thousands of people rallied against the government’s handling of an economic crisis, in one of the biggest protests the country has seen in years…
“Protesters blocked roads across Lebanon with burning tyres and security forces fired tear gas at demonstrators in central Beirut early on Friday, Lebanese media said.”
“UAE banks have not recovered fully from the global financial crisis, when widespread restructuring took place, especially in debt-ridden Dubai. …“State-related debt could also become problematic as a result of government-tied entities being exposed to the property sector.”
“More than two-thirds of global corporate bond fund managers expect default rates to climb over the next 12 months, according to a new report from the International Association of Credit Portfolio Managers.
“In a September survey of over 100 member institutions in more than 20 countries, 68% of respondents said they expect defaults to rise, up from 58% three months ago.”
“The next economic downturn will be much more severe than the last financial crisis because firms have twice as much outstanding debt as they did in 2008, said a leading academic this week.”
“Poland’s central bank has more than doubled its gold holdings in the last two years. Analysts say the factors behind this sharp increase are also pushing other central banks to buy more gold.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.