Is a Double-Dip in the Global Economy Possible?

China’s export growth shows major slowdown as some reports indicate a 9.2 percent drop from one year prior. Retail sales rose 13.1 percent but also fell short of analyst’s predictions. In a recent briefing, Gao Hucheng, China Vice Commerce Minister stated that China continues to maintain confidence that they will reach their projected growth target of 10% for the year. Money, European Union Sales, and Retail Suppliers have all seen downslides in growth from prior year figures for China. Numerous large global economies are facing declines and stagnation in growth forecasts. The bottom line is that the figures represent signs that the global economy is weakening.
China is ‘Missing the Mark’ for Numerous Forecasts

China represents the world’s second largest economy is experiencing the worst export growth since 2009. Additionally, a visible dip in new yuan lending in July showed the lowest monthly figures since September 2011. M2 which is the broadest measure of the money supply came in at 13.9 percent last month against a predicted 13.8 percent gain. Local currency lending in China was significantly lower at 540.1 billion yuan than Bloomberg News Survey’s predicted at 919.8 billion. Li-Gang, Hong Kong based leader of the Greater China Economics at Australia & New Zealand Banking Group, Ltd. says that “there’s a risk of a ‘hard landing’ and the government may lower banks reserves requirements as soon as today.”

The main concern is the decline in exports although Vice Commerce Minister Gao Hucheng voices confidence that China will still achieve the 10 percent goal for trade expansion this year. This is in the face of Chinese sales to European Union countries falling 16.2 percent for the previous month. The Central Bank of China stopped gains in the yuan during the first half of 2012 which gave some reprieve to exporters that are facing a deteriorating global demand. Li & Fung Ltd., the world’s largest retail clothing and toy supplier dropped drastically. Li & Fung Ltd. supply goods to retailers such as Target and Walmart and the economical downslide in the United States contributed to the slump experienced by exporters in the first half of the year.
Additional Global Effects of Euro Debt Crisis are Visible

Nearby Singapore also experienced a shrinking in its economy by 0.7 percent in the last quarter, less than the projected 1.1 percent. In France, the second largest European economy is weathering industrial stagnation as of June which lends to the possibility that France is heading toward their first recession in three years. Elsewhere, the Russian Central Bank opted out of raising loan rates for an eight month in row, trepidation over inflation risks due to higher interbank rates and weak harvests which can both lead to a constraint in lending growth. In Canada, the unemployment rate held steady at 7.2 percent in July while the Brazilian unemployment rate dropped to 5.7 percent for a third month in June. Germany underwent an unexpected slowdown in inflation from 2 percent in June to 1.9 percent in July. Overall China is facing export deceleration at a slowdown rate of up to 7.4 percent for the quarter. Much uncertainty remains and is centered on the risk presented by the European debt crisis and the negative effects that it may have on global economies.