The OECD's index of leading indicators for China, India, Brazil, Canada, Britain and the eurozone have all tipped below the warning line of 100, with the pace of the decline in Europe exceeding the onset of the Great Contraction in early 2008.
Professor Simon Johnson, a former chief economist at the IMF, rattled nerves earlier this week by warning the world is "looking straight into the face of a great depression".
The grim data is coming thick and fast. Japan's machinery orders fell 8.2pc in September as the post-Fukushima rebound lost steam and the delayed effects of the super-strong yen began to bite. Export orders have been declining for eight months. "Outright contraction is possible in the quarters ahead," said Mark Cliffe from ING.
Exports in the Philippines dropped 27pc in September, the sharpest fall in two years. Korea's exports have showed sharply, caused by a 20pc slide in shipments to Europe. Manufacturing has been contracting for the past three months.
Christine Lagarde, the IMF's chief, warned in Asia that "there are dark clouds gathering in the global economy. Countries need to prepare for any storm that might reach their shores". She said "adverse feedback loops" are at work as financial stress and economic woes feed on each other.
China's carefully managed soft landing has turned uncomfortably hard, with ripple effects through the commodity markets. Spot iron-ore prices have dropped 30pc since July to $126 a tonne. Copper prices have fallen 20pc since August.
Barclays Capital said the risks of contagion to China has become serious. The bank is monitoring the country's "key high frequency data" for early warning signs of the sort of sudden crash in metals demand seen during the Lehman crisis...
"The credit spigot has been turned off in the US," said Chris Whelan from Institutional Risk Analytics...
Fiscal and monetary stimulus has disguised the underlying sickness in the debt-laden economies of the West over the past two years. This heavy make-up has at last faded away, exposing the awful visage beneath.
It is a delicate moment. The risk of a synchronised slump in Europe, the US and East Asia is bad enough. What is chilling is to face such a possibility with the monetary pedal already pushed to the floor in the US, UK and Japan.
Worse yet is to do so with Europe spiralling into institutional self-destruction...
No comments:
Post a Comment