#6 Health, Wealth, and LifeQuestLiving Economic growth is slowing all around the world

Economic growth is slowing all around the world

The economic turmoil was on President Trump’s mind even on Christmas Day, when during an Oval Office appearance, he cast fresh doubt on the record of Federal Reserve Board Chairman Jerome H. Powell, whom he has increasingly blamed for the market weakness.

A global economy that until recently was humming has broken down, a sharp contrast to the picture just a year ago when the world was experiencing its best growth since 2010 and seemed poised to do even better.

Already, builders in the United States are erecting fewer single-family homes. German factories are sputtering, and in China, retail sales are growing at their slowest pace in 15 years.

economic growth-life quest journalThe sudden slowing has fed into a global financial sell-off that has driven several U.S. stock indexes into or near “bear market” territory with losses of more than 20 percent. Stocks fell sharply Monday near the end of what is shaping up to be Wall Street’s worst December since 1931.

The economic turmoil was on President Trump’s mind even on Christmas Day, when during an Oval Office appearance, he cast fresh doubt on the record of Federal Reserve Board Chairman Jerome H. Powell, whom he has increasingly blamed for the market weakness.

“Well, we’ll see,” the president said when a journalist asked whether he had confidence in Powell. “They’re raising interest rates too fast; that’s my opinion. But I certainly have confidence. . . . I think that they will get it pretty soon. I really do.”

The selling has caused a frenzy of unusual activity in the Trump administration, where efforts by Trump and Treasury Secretary Steven Mnuchin to allay fears seem only to have inflamed them. Political turmoil at the highest level in the United States and other advanced economies — epitomized by the partial shutdown of the U.S. government and street protests in France — is further feeding investor anxiety.

Additional forces threaten to turn what had been a gradual global slowing into something more serious. Central banks that went to extraordinary lengths to boost growth after the global financial crisis have become less supportive — with the Fed announcing another increase in its benchmark interest rate last week. And tensions over Trump’s “America First” trade offensive are sapping business confidence on multiple continents.

“The theme coming into this year was, everything was synchronized; everything was good everywhere,” said Torsten Slok, chief international economist for Deutsche Bank Securities. “Now everything is not good everywhere.”

That is only a slight exaggeration. Outside of the United States, which had estimated economic growth of 2.7 percent in the fourth quarter, according to the Atlanta Federal Reserve Bank’s “nowcast,” the picture is increasingly gloomy — and most economists say the U.S. economy will slow in 2019.

For the past month, economic data in the United States, Japan and the euro zone consistently has failed to meet analysts’ expectations, according to a Citigroup Global Markets index of economic surprises. Chinese results also began disappointing on Dec. 10 amid signs that the economy is slowing more sharply than policymakers had anticipated.

The adverse signs are enough for economists such as Megan Greene of Manulife Mutual Funds to warn of a “synchronized slowdown.” Few economists expect an outright recession in the United States or a “hard landing” in China, where the authorities are trying to manage a gradual deceleration.

But anemic performances by the global economy’s main engines could shake already stressed political systems in several countries, including the United States, where Trump will be preparing to rev up his reelection campaign.

“The political risk in a slowdown or even recession in 2019 is of stirring up already worrisome levels of nationalism,” George Magnus, author of “Red Flags: Why Xi’s China Is In Jeopardy,” said via email. “Quite aside from resolving the issue about what macro tools to use in such circumstances, the political temptation to raise barriers, including trade, might get still stronger. China could be especially volatile.”

In the United States, despite nearly a decade of uninterrupted economic growth, nearly 55 percent of Americans say the country is on the wrong track, according to the RealClearPolitics polling average. A sharp economic slowdown could short-circuit belated rewards for workers who are receiving average annual wage increases of 3.1 percent, the highest mark in nine years, according to the Bureau of Labor Statistics.

“If that doesn’t continue, you’ll see continued domestic political polarization,” said Peter Harrell, a senior fellow at the Center for a New American Security. “Clearly, a slowing economy is a huge concern to the Trump administration.”

An economic slowdown — coupled with tumbling stock prices — could also make the president more amenable to a quick deal with China in the months-long tariff war, Harrell said.

“They are getting nervous about the markets and nervous about the slowing in the economy, and there’s a similar reaction in Beijing,” he added.

The souring economic outlook can be seen on the bottom lines of multinationals such as FedEx. The global package-delivery company saw its share price sink last week as investors were spooked by executives’ downbeat forecast.

“Internationally, economic strength seen earlier this year has given way to a slowdown,” Rajesh Subramaniam, a FedEx executive vice president, said on a conference call for analysts. “The peak for global economic growth now appears to be behind us.”

Though company officials said the shipping business remains good in the United States, sluggish orders in Europe and China forced FedEx to lower its earnings guidance for next year and launch a voluntary employee buyout designed to save up to $275 million annually.

About The Author

Robert Annenberg
Robert Annenberg
Robert Louis Annenberg Is a 40 year seasoned property owner, manager, investor, builder/developer and business man who is also an author of five published books to date (Amazon.com) and the chief editor of LifeQuestJournal.com. He can be reached at: Info@RobertAnnenberg.com and (201) 289-2500.