Growth Slowing Everywhere : Another Crisis Looming?

Even though the indicators for growth in large industrialised countries are just quarterly ones and could be nullified by the next quarterly statistics, they still are quite worrisome. Because they almost all confirm the slowing trend, for one, but above all, this trend is worldwide : Only +0.1% in the United States, +0.2% in the Eurozone, and a lower number in China (+7.4%) that is still high, but everyone knows that this number is inflated (in reality, it should probably be divided in half).

Let’s take a look at the Eurozone : Actually, its growth is at zero, if we take out Germany with its +0.8%. But even then, these numbers do not tell the whole truth : German financial institutions and the Bundesbank are expecting a clear slowdown for the coming quarters due to decelerating exports. The only thing explaining this growth is local consumption, but it will not maintain itself at this rythm. And exports are falling, notably because their first clients, other Eurozone countries, are either in stagnation or in recession (0% for France, -0.1% for Italy, -0.7% for Portugal). The only exception would be Spain, with a meager +0.4%.

What is even more worrisome and, really, astounding, is that the Netherlands are in a 1.4% recession for the first quarter of 2014! This dynamic country with high productivity, very open to international trade, is showing a lower GDP (just like Finland with a comparable profile, at -0.4%). This is really starting to look like an advanced indicator of a global economic contraction…

The only exception to this somber picture… Japan, showing +1.5% growth for the first quarter, a bit higher than the previous ones. Of course, this performance is fictitious, because it is based on budgetary deficits and money printing, and this country has left all sanity behind with a public debt amounting to 250% of its GDP. This kicking the can down the road will probably end badly but, in the meantime, saké for everyone!

This simultaneous crumbling of an already teetering growth is cause for concern. And, needless to say, the threat of deflation, that so obsesses the media and the economists, is a symptom here, certainly not a cause. The real reasons are both deeper and more obvious : We have not come out of the 2007-2008 crisis yet… we’ve only been buying time with debt and QE plans.

There always is this media noise, constantly repeating itself, about optimistic growth predictions, but only real results should count, and they are not good at all. We’ll have to wait for the second quarter’s numbers to confirm or infirm this trend; a technical bounce may occur, but this slowing of growth seems to be announcing something worrisome. Because when even the governments and central banks cannot succeed in creating illusions, the situation is getting out of hand…

Philippe Herlin

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