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.

Is Italy Sinking into the Economic Mire?

In a year’s time, Italy’s economy dipped twice as much as predicted by the Italian government of techocrats. The financial hit spread itself around to include agriculture, industry and services. Italy was down close to 0.8 percent in the GDP after the first quarter in 2012. It was the country’s fourth drop in a row. A survey of analysts came close, saying Italy would fall 0.6 percent, but it was worse than even they expected. The country hasn’t seen a fall like that since 2009.
While the drop is startling, it should be noted Italy’s economy has dragged for more than 10 years. Financial investors are worried. Prime Minister Mario Monti is having a difficult time of it, trying to cut the deficit 0.1 percent of the GDP by 2014. Italy needs public financing from Monti’s European partners. It’s benchmark bond yields are still sitting at nearly 6 percent, and acquired growth was negative. And, if in the next two quarters, the GDP reads flat, it will down a total of 1.9 percent since last year.
Austerity Measures for Italy

Monti claims he will step down next spring as the new election begins. At the end of 2011, he made more than 20 billion euros in cuts to stave off a debt crisis, but the package was flawed because of its compounding tax hikes. The cuts only pushed Italy further into the recession, and dampened the spirits of consumers. Consequently, 2012 will see an influential dive in spending per capita, the first of its size since post war, the retail confederation projected. Italy’s economy is very inefficient, some say. It has failed in the areas of infrastructure development, research investment and market reforms. Italy also has an above average deficit. Last year, the country’s ranking was 87th in the world.

Factors surrounding the debt crisis include the financial forecasts that based everything on debt issue costs. In the second quarter, Italy experienced earthquakes in Emilia. Italians aren’t saving anymore. They don’t have the money to save or invest, and earlier this summer, Italy paid its highest interest rates so far this year. Taking all that Italy has lost and most likely continue to lose, its double-dipped in recession. Unemployment is heading toward 10.4 percent for 2012, and 11.8 in 2013, but hitting a peak of 12.4 percent in the fourth quarter of 2013.
Gold Reserves in Italy

The business lobby, Confindustria, criticized the labor reforms that were recently approved by parliament. The lobby stated the reform was “inferior to expectations and the needs (of the market), and risks increasing complications.” There is no available data from the effects of the reform, but it is far removed from Italy’s impressive holdings. Italy is home to the world’s third largest gold reserve; an innovative business community; and industrious agricultural wine communities. Italy is the world’s largest producer in wine. The country is also savvy in the automobile industry, appliances and fashion. Post war was a turning point because industry abruptly replaced agriculture. The country itself was devastated in post war.

Italy continues to lead in world trade and exports. It continues to live by very high standards, perhaps deceiving the perception that it is enjoying the world’s eighth highest quality of life. The southern part of the country is underdeveloped and poor. Further issues holding the country up from advancing are political corruption, organized crime and unemployment.

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