Economies the World Over Are Stagnating; This is Why
Economists and investment experts the world over agree that the global economy is experiencing one of the most uncertain times. A myriad of factors is contributing to this. Starting with a hanging cloud of uncertainty with the Brexit deal, the dragging US-China trade war, political unrest in Hong Kong, and slowing growth in Europe.
The US Economy Rides High
Despite the persistent uncertainties in the global economy, the United States is having one over the world. Its economy is 70% consumer-driven. Only a meager 10% of the GDP comes from global trade. This fact means that the US can ride any wave of uncertainty that may leave other economies in shambles.
The equity markets in the United States have continued to grow, even with the trade war persisting. This buoyancy in the equity markets is the best proof that the consumer-driven US economy is the model for the world. Although experts expect that there will be turbulent times, the equity markets in the US show the greatest potential to keep growing.
Pessimistic Global Growth
Experts observe that the global economy continues to grow year on year. However, the prospect of the same is less optimistic than it was a year ago. Last year, asynchronous swing appeared for the first time since the world recovered from the financial crisis of 2009. Although, as the year continued, a lot of divergences began to appear.
The US and Indian economies continued to grow while other economies such as the Japanese and Chinese economies slowed. The European Union also experienced a slowdown factored largely by Brexit. 2018 was also the year that a new deceleration trend appeared and which experts expect will continue beyond 2019. From 2019 onwards, India’s economy is the one experts are betting on to continue growing while others decelerate. However, it is interesting to see what the reaction will be by the US economy.
Recent data released by the Labor Department in the US show a 50-year low unemployment record. Strong labor data backed by the willingness of consumers to spend is the energy that carries the US economy. Some experts are already betting that this economy will continue to grow even with any uncertainties existing.
Uncertainties Hanging For the Manufacturing Industry
The need for businesses to cut costs was the single greatest contributing factor to globalization. However, recent policies are threatening this, and the manufacturing sector is likely to take a hit. In September, the US-registered its first slowdown in the manufacturing industry in 35 months. This slow down comes even after 37% of the imports into the US from Mexico consisted of intermediate inputs.
While the US claims to be implementing policies and tariffs to bully other countries into lowering theirs, the resultant effect is companies hurting. Observers expect many manufacturers to pay more for cross border imports of inputs this year than they have since the financial crisis in 2009. However, experts recommend that divergence from a protectionist environment is the key. A protectionist environment is likely to contribute to ballooning costs, which will slow down the manufacturing industry.
