Massive Disappointment

Annualized Growth Downgraded

Note that Eurozone quarterly results are not annualized, unlike the US. The reported 0.2% in the Eurozone would equate to a report of 0.8% to 0.9% in the US.

Risks of Global Recession Rising

The Guardian has Live Coverage of Eurozone GDP.

> Alastair Neame, senior economist at economics consultancy CEBR, is concerned that Germany’s economy has faltered over the summer.

CEBR Comments

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  • “Eurozone growth of 0.2% in Q3 is the slowest rate of expansion since Q2 2014, which indicates that, amongst a range of risks, global trade worries may be having a bigger effect on business confidence than had been expected. With French GDP growth having risen to 0.4%, German growth is now under the spotlight as the currency bloc begins to stagnate.“
  • "Despite Germany showing some signs of labour market strength, as unemployment fell to the lowest rate since 1990 (5.1%), the economic outlook is somewhat clouded. The latest business surveys indicate that economic sentiment in Germany has waned as a result of growing global uncertainty. The Ifo business climate index fell for the second consecutive month to 102.8 points in October."
  • "Cebr estimates that the risk of a global recession in the next two years has risen from a fifth a year ago to a third this autumn."
  • As global business cycles mature, trade conflicts and emerging market crises could combine to tip the world into a downturn exacerbating the Eurozone’s problems.

Persistent Brexit uncertainty and Donald Trump’s trade wars are both being blamed for derailing to derail the eurozone recovery.

Rome’s borrowing plans already breach EU rules; if the economy is smaller, then the deficit will be an even larger share of GDP.

Global Recession Definition

The CEBR did not define, at least in those comments. There is no widely agreed upon definition.

Wikipedia notes "Before April 2009, the IMF argued that a global annual real GDP growth rate of 3.0 percent or less was "equivalent to a global recession". By this measure, there were six global recessions since 1970: 1974–75,[1980–83, 1990–93 1998, 2001–02, and 2008–09.

I would use a tighter definition of 2.0% or less.

I expect a global recession and the US will not be immune. China did not decouple in 2007 and the US will not decouple in 2019.

The Fed does not see this coming.

Mike "Mish" Shedlock

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