1. Global Recession
"There is a big difference between making a claim the economy is in recession from a claim the economy is headed for one.
Case for a Global Recession
I think the entire global economy is in recession and said so on July 6, 2012 in Plunging New Orders Suggest Global Recession Has Arrived
However, we need to define the term "recession"
Contrary to popular myth, recession does not mean two consecutive quarters of economic contraction. Rather, two consecutive quarters of economic contraction is a sufficient, but not necessary condition.
In the US, the NBER is the official designator of recession start and end points. Many recessions have started with GDP still growing.
The "Conditions for Global Recession" are even looser. "The International Monetary Fund (IMF) considers a global recession as a period where gross domestic product (GDP) growth is at 3% or less. In addition to that, the IMF looks at declines in real per-capita world GDP along with several global macroeconomic factors before confirming a global recession."
Given current conditions are what one would expect from outright stagnation (if not worse), I am confident a global recession has begun.
What About a US Recession?
On June 21, I gave 12 Reasons US Recession Has Arrived (Or Will Shortly).
Tipping the Balance to Now (Not Shortly)
- The Third Consecutive Weak Payroll Report
- The pending Global Collapse In Auto Sales
- Plunge in China Import Growth (For discussion see China Import Growth Plunges, Trade Surplus Hits 3-Year High; Will US Response Be Protectionism? Is China Headed For a Deflationary Shock?)
That is enough for me."
2. U.S. Economy is in Recession
"Lakshman Achuthan, chief operations officer of the Economic Cycle Research Institute, talks about the performance of the U.S. economy:"
3. China growth falters and inflation eases
"The downbeat flow of economic data for China continued on Tuesday, with a sharp slowing in import growth raising concerns about the underlying strength of domestic demand in the world’s second-largest economy. Imports increased 6.3% on an annual basis in June, down from 12.7% in May. Growth of exports meanwhile eased from an annual rate of 15.3% to 11.3%."
4. Global growth stalling as euro gloom spreads
"The global PMI hit a three-year low in June, suggesting the pace of economic growth slumped to an annual rate close to 1%. Manufacturing contracted for the first time since last November and growth slowed to near-stagnation in services. Both the Eurozone and Japan were found to have contracted during the month while growth slowed in the US, UK and China.
5. Deflationary shock from China
"China is on the cusp of a deflationary vortex.
This was signalled late last year by the sharpest contraction in the (real) M1 money supply since modern records began. The hard data is now confirming the warnings.
Consumer prices have been falling for the last three months, producer prices have been falling for four months. This is not a food cost story. It is systemic.
"While an economy-wide generalized deflation is yet to be seen, the deflationary spiral looks to have started in some industrial sectors, attesting to considerable stress with the economy. Persistent deflation can be poisonous," said Xianfang Ren from IHS Global Insight in Beijing.
Indeed it can be poisonous, and China already has the twin-afflictions of the deflation malaise: a fast aging nation, and a surfeit of factories and industrial plant.
Meanwhile, Japanese machine tool orders fell 14.8pc in May, the biggest drop since 2001 – when Japan’s deflation began in earnest. The post-Fukushima reconstruction boom has run its course. Asia is turning stone cold.
All engines of the global economy are sputtering at the same time."
6. China manufacturing slowdown
"China’s manufacturing grew at the weakest pace since December, increasing the odds the government will boost stimulus to counter a deceleration in the world’s second-biggest economy."
7. Spain in second deepest recession in history
"Spanish Prime Minister Mariano Rajoy announced tax increases and spending cuts totaling 65 billion euros ($80 billion) in the next two-and-a-half years, risking a deepening recession to keep the euro financial crisis at bay."
8. Finland warns of euro exit
"FINLAND would consider leaving the eurozone rather than paying the debts of other countries in the currency bloc, Finnish Finance Minister Jutta Urpilainen has said.
In a newspaper interview today she said she'd consider crashing her AAA-rated country out of the eurozone.
“Finland is committed to being a member of the eurozone, and we think that the euro is useful for Finland. Finland will not hang itself to the euro at any cost and we are prepared for all scenarios.
“Collective responsibility for other countries' debt, economics and risks; this is not what we should be prepared for. We are constructive and want to solve the crisis, but not on any terms,” she said.
Meanwhile, eurozone officials are cautioning against expecting any quick action from the currency bloc's finance ministers when they meet on Monday to sort out the tangle of loose ends and disagreements left by last month's EU debt-crisis summit."
9. Japan machine orders drop
"Japan’s current-account surplus was the smallest for the month of May since at least 1985 and machinery orders fell the most in more than a decade.
Japan’s trade position has weakened due to growing energy imports after last year’s earthquake and nuclear meltdown and also the yen’s gain of 4.9 percent against the dollar since mid- March. Prime Minister Yoshihiko Noda gave approval for a restart of reactors at the Ohi nuclear plant, which resumed power generation last week, to avoid power shortages and rolling blackouts over the summer.
“Today’s machinery order drop is very large, and it may be a signal that Japanese companies are becoming cautious about investment” amid concern about a global economic slowdown, said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management in Tokyo. “Though exports have been slumping, we don’t expect Japan to have any major trade deficit.”"
10. Credit card borrowing for everyday living expenses on the rise
"College student Simone Bernstein, 20, is using her credit cards to cover her living expenses this summer. She chalks up the debt to an opportunity cost: Her (barely paid) summer internship in New York City will be worth it down the line, she hopes.
"My payoff plan is in the long run," said Bernstein, a premed student at St. Bonaventure University in western New York. "I hope I can make money during the year, whether it’s working in the library, and find other ways during school."
Bernstein is in good company: Americans are returning to plastic in increasing numbers. Consumers charged more on their credit cards in May than in any other month since November 2007, according to data released Monday by the Federal Reserve."