Tuesday, December 1, 2015

Gavyn Davies on world growth and the not piddling of panties

Gavyn Davies - world growth bounces back a bit. Quote:

Global economic data published in November have shown a further uptick in worldwide activity growth after the significant dip that was reported after mid-year.

It now appears almost certain that the 2015 Q3 dip in world activity was not the precursor of a slide towards global recession. Instead, it seems to have been another of the minor mid-course corrections that have been a consistent feature of the moderate upswing in global activity that started in 2009.

So we shouldn't piddle our panties after all? Because mid-course corrections are okay, right?

China has not suffered a hard landing; but severe deflation in the manufacturing sector remains unchecked, and the economy is clearly slowing as rebalancing between old and new sectors takes effect.

Most other emerging economies are now embarking on a major deleveraging cycle, and this may drag on EM growth rates for several more years. Growth in the advanced economies as a whole has been stable at about trend rates throughout 2015; but underlying productivity growth remains extremely weak by past standards. Therefore the advanced economies do not appear sufficiently robust to withstand an intensification of the EM shock, should that occur.

Wait... you just said we're not supposed to piddle our panties. Is Jeffrey Fucking Kleintop injecting himself into your writeups too now, Gavyn?

Advanced economies aren't affected by hiccups in pissant little third world economies, Jeffy. We had no problem in 1998, we'll have no problem in the future. At worst, it'll mean more profit for Nike.

Within the advanced bloc, the most notable change has been the acceleration in the eurozone compared to the US. Many observers became pessimistic about growth in the eurozone when the China crisis occurred in August, on the grounds that exports from Europe (especially Germany) are more exposed to Chinese demand than is the US. These differences in trade exposures have been exaggerated, and in any event have been offset by fiscal and monetary easing in the eurozone, and the decline in the exchange rate.

Nevertheless, it is important to remember that even in the best of times, there has never been a European company worth investing in, so it's never paid to follow the hedgefund lemming brigade into Europe ETFs.

It's especially worse now, as Germany has proven happy to continually sabotage European growth in favour of more profits (and socialized losses) for Deutsche Bank.

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