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    The global economy: risk of a slowdown

    Many economists are warning about the risks of a slowdown in the global economy. Recent statistics from the main economic centers of the world – the US, the Euro zone, China and Japan – shows that these fears are not groundless.

    The United States

    In the first quarter of the year the US economic indicators showed mainly disappointing dynamics. However, some members of the US Federal Reserve tried to reassure the public, blaming bad weather for this poor statistics and promising a rapid recovery soon. However, these promises may not be fulfilled …

    In March, the leading indicators index, published by the Conference Board, rose by only 0.2% for the third consecutive month, while in 2014, its average growth was 0.6%, and some months it even reached 0.9%. The weakness of this index, which is predicts future economic activity, indicates the risk of a slowdown of the US economy later in 2015.

    Especially sad that the weakest component of the index was building permits. And I hoped that the real estate and construction sector would be one of the drivers of the US economy this year!

     Eurozone 

    Seems like after the launch of the quantitative easing in the Euro the risks of a new recession in the region were pushed aside. Economic situation in the monetary unit is improving, which is a sign of inflationary recovery in those countries where it had fallen well below zero. For example, in Spain, the consumer price index rose sharply by 0.4% in March from -1.1% to -0.7% y / y. But the risk of a Greek default does not allow markets to relax: no one can guarantee that this whole saga has completed safely and painlessly for the economy of the E-19.

    China 

    Slowdown of Chinese economy – it is not a hypothesis, but a proven fact. Quarterly GDP growth in China has dropped to five-year low, forcing the People’s Bank of China to resort to new incentives.

      Japan 

    The country of the rising sun can certainly boast some success of its economic policy. Corporate profits in the last quarter of last year reached five-year highs. Core machinery and equipment orders rose by 5.9% y/y in February, which promises the Japanese engineering further growth. However, at the level of small and medium business, focused on the domestic market, growth is very modest. Consumer demand also remains relatively restrained on the back of slow wage growth ( 0.4% in 2014). Nominal income growth lags behind inflation, which holds back household spending, which form about 60% of Japan’s GDP.

    Conclusion

    The risk of a simultaneous slowdown of the world largest economies is exacerbating an already difficult situation. If a slowdown occurs only in one region, one would hope for its rapid recovery due to foreign demand for its products. Now lack of export demand puts pressure (more or less) on the growth rate of the overwhelming majority of leading economies.

    Fortunately, in this difficult situation the world economy can be supported by low energy prices. Expensive oil would make current growth problems even more serious.

     

    Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!

    Many economists are warning about the risks of a slowdown in the global economy. Recent statistics from the main economic centers of the world – the US, the Euro zone, China and Japan – shows that these fears are not groundless.

    The United States

    In the first quarter of the year the US economic indicators showed mainly disappointing dynamics. However, some members of the US Federal Reserve tried to reassure the public, blaming bad weather for this poor statistics and promising a rapid recovery soon. However, these promises may not be fulfilled …

    In March, the leading indicators index, published by the Conference Board, rose by only 0.2% for the third consecutive month, while in 2014, its average growth was 0.6%, and some months it even reached 0.9%. The weakness of this index, which is predicts future economic activity, indicates the risk of a slowdown of the US economy later in 2015.

    Especially sad that the weakest component of the index was building permits. And I hoped that the real estate and construction sector would be one of the drivers of the US economy this year!

     Eurozone 

    Seems like after the launch of the quantitative easing in the Euro the risks of a new recession in the region were pushed aside. Economic situation in the monetary unit is improving, which is a sign of inflationary recovery in those countries where it had fallen well below zero. For example, in Spain, the consumer price index rose sharply by 0.4% in March from -1.1% to -0.7% y / y. But the risk of a Greek default does not allow markets to relax: no one can guarantee that this whole saga has completed safely and painlessly for the economy of the E-19.

    China 

    Slowdown of Chinese economy – it is not a hypothesis, but a proven fact. Quarterly GDP growth in China has dropped to five-year low, forcing the People’s Bank of China to resort to new incentives.

      Japan 

    The country of the rising sun can certainly boast some success of its economic policy. Corporate profits in the last quarter of last year reached five-year highs. Core machinery and equipment orders rose by 5.9% y/y in February, which promises the Japanese engineering further growth. However, at the level of small and medium business, focused on the domestic market, growth is very modest. Consumer demand also remains relatively restrained on the back of slow wage growth ( 0.4% in 2014). Nominal income growth lags behind inflation, which holds back household spending, which form about 60% of Japan’s GDP.

    Conclusion

    The risk of a simultaneous slowdown of the world largest economies is exacerbating an already difficult situation. If a slowdown occurs only in one region, one would hope for its rapid recovery due to foreign demand for its products. Now lack of export demand puts pressure (more or less) on the growth rate of the overwhelming majority of leading economies.

    Fortunately, in this difficult situation the world economy can be supported by low energy prices. Expensive oil would make current growth problems even more serious.

     

    Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!


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