Frankly, we find this past week’s batch of economic data unsettling. The march of economic power from the developed to the emerging world seemed to take a step backwards. Asian manufacturing continued to slow, with a very slight expansion in China according to official data. In the US, GDP growth, manufacturing and jobless claims were stronger than expected. Europe is improving.
But, there’s also a note of caution. Half-way through second-quarter earnings season, US companies’ earnings have been beating expectations by a lot less than usual. And this isn’t a blip, but an early sign of global economic decline.
Four things are afoot: Demographics-the workforce is topping out; natural resources-things cost more and more; technology-nothing big on the horizon; and climate change-it’s going to get expensive.
The Euro area economy has begun to grow again. Britian’s recovery has gathered pace. House prices rose 06% in August and mortgage lending hit a five year high. Germany’s retailers sold less for the second month running in July with sales down 1.4%. Unemployment in Italy dipped to 12%, but youth joblessness rose again. China data- from trade to industrial, showed improvement. Japan’s second quarter GDP growth of 2.6%, compares well with its 3.8% rate of growth in the quarter earlier. Europe’s microeconomic numbers point to a lasting recovery. The pace of budget cuts has fallen. The main damage has passed. Households are spending and firms are ready to invest. It seems that all areas of strength depend on America.