The Nine Signs That A New Global Recession Has Arrived
Shipping is a critical indicator of global financial health because so many of the world’s goods travel by sea. This includes everything from crude oil to agricultural products to autos. Industry giant AP Moller-Maersk recently reported earnings and said demand had declined sharply. The latest data about dry bulk commodities-shipping costs, as tracked by the Baltic Dry Index, revealed that rates have fallen by a third so far this year. Hanjin Shipping, Orient Overseas and Mitsui OSK Lines have not been able to put into effect normal surcharges that go with peak demand periods, which is an important way that the industry makes money, according to Bloomberg. That is because there simply is not enough demand for the movement of goods from nation to nation.
2. GDP Forecasts
Global economic organizations cut GDP forecasts simultaneously. The Organization for Economic Cooperation and Development’s May report on GDP improvement among its member nations said the economic expansion had faltered and the decline was expected to continue into 2012. The IMF made similar comments in June. The World Bank also expects a slowdown in global expansion and warned that prices of commodities and oil could cripple any further expansion. Each of these groups is unrelated to the others, so the appearance of red flags from all of them is significant. Each also has the capacity to gather data from most countries around the world, which makes their research capacities unique.
3. Oil demand falls
OPEC cut forecasts for demand. Last month OPEC released a report with its predictions for the year and stated, “Concerns over debt levels in Europe and the U.S., and signs of slowing economic growth in China and India, have spooked the market and raised fears in some quarters of a double-dip recession.” The IEA noted in its most recently Monthly Oil Market Report that, “For the first time since March 2009, China’s monthly apparent demand contracted on an annual basis, falling by 1.5% in June.” It added that, “The decline coincided with evidence that China’s economy is also slowing down and that higher end-user prices are weighing upon demand.” Oil prices are the single most important signal of crude demand. WTI crude has fallen from $105 a barrel less than three months ago to under $80 recently.
4. Stock markets retreat
The world’s major stock markets retreat in lock step. The stock indices in virtually every major nation have had large sell-offs recently. Markets in regions where investors believe that growth will continue to be robust ought to at least trade at the levels they did in early summer, but none do. The Dow Jones Industrial Average and other major indices in the U.S. have fallen 15% recently. Germany’s DAX has struggled after news that the economy there has slowed considerably, which had an impact on stock prices. The UK may already be in recession and its FTSE index shows this. France’s CAC 40 is down as well. In Japan, the Nikkei is down more than 10% in the past month. The stock markets in the strongest regions economically should be doing better at least. But Hong Kong’s Hang Seng is down over 10% in the last month, as is Brazil’s Bovespa. The signals from these stock markets show that the slowdown has spread well beyond the developed world.
Unemployment problems worsen across a number of larger nations. The economies with the greatest debt problems in the developed world also tend to have the highest unemployment. The level is 15% in Greece. In Ireland, the number is 14%, and it is 21% in Spain. Government stimulus packages in these nations have become economically impossible as far as political leaders are concerned. But slow-growth nations are not the sum of the trouble. In an analysis of China’s employment level, The Christian Post reported that, “The CIA Factbook records the unemployment figure for China as being under 4 percent, but this percent includes an asterisk that reads: ‘the data is for urban areas only; including migrants may boost total unemployment to 9.’” A drop in the need for exports due to decreased demand in Japan and the West would drive this Chinese joblessness figure higher.