China economic slowdown 2012 – China leading indicators continue to point to slower economic growth.
The Chinese economy continues to face the impact of a global contraction. China’s economy is heavily reliant on exports and is facing the headwinds of a contraction around the world. The leading indicators are all pointing to signs that the Chinese government may step in with additional stimulus to boost the slowing economy. Yet is this useful or even helpful? China is already experiencing a large amount of bad investments in real estate and public work projects that in many cases are poorly done or even well thought out. Of course China is cautious on many fronts but the overall leading indicator index does give us a pause. The US and European economies are still fragile especially with Europe and the many nations that have tipped fully into recessions.
The leading indicators tell the story:
The global slowdown is an ongoing story.
The markets have entered a stage of collective belief that the European Central Bank and the Federal Reserve have now reached a stage of elevation where they can control markets. This force is so prevalent and strong that even with very high unemployment and giant fiscal imbalances the US stock markets slowly inch their way to their previous peak. If we examine the fiscal imbalances of various countries in Europe and also look at the US we realize that spending is getting us into a deeper hole only before the hour of big government expenditures. The process seems simple on paper as long as GDP is growing at a brisk pace. For the moment however, we have failed to enter a stage of growth and many parts of the world are slowing down dramatically or contracting.
Fiscal imbalances are at elevated levels:
So the story continues with the belief that somehow, some big force like the ECB or Fed can prop up the markets. Everyone seems to be operating on the notion that short term loans are the way to solve the challenges ahead.
The current US drought is impacting commodities heavily with many futures going up nearly 40 percent just in one month. The NOAA does not expect drought conditions to improve until October and that is a long-time away when the markets are punishing the current market because of Mother Nature slamming food crops. We are so disconnected from our food supply. In the Dust Bowl era that permeated the 1930s and conjures up memories of The Grapes of Wrath we realize how deeply an agriculture problem can have on the overall economy and the lives of people. Yet a very tiny portion of our population now works in the farming business. Yet we will pay the price at the grocery store because of these droughts. In developing nations where food constitutes a large part of a family’s budget, the impact is going to be much larger and profound.
For all of our technological advancements we still do not have full control over some things.