Q3 Earnings Horror Show

The International Monetary Fund (IMF) has downgraded its global growth forecast for both this year and next, highlighting among other things, the threat of weakening demand in the Eurozone and a slide into deflation. This comes after consumer price growth in the euro zone slipped again in September, coming in at just 0.3 percent.

There’s absolutely no sign of growth in the Euro region. France is stagnant, Italy is back in recession, and even the German economy, once the pillar of the Eurozone, shrank in the second quarter. German industrial output fell by 4 percent in August, with the worse-than-expected drop coming a day after the country’s industrial orders had their largest monthly decline since the global financial crisis in 2009.

The United Kingdom isn’t fairing any better, as manufacturing output for August grew just 0.1 per cent, down from 0.3 per cent in July.

And then of course we have Japan, whose industrial production shrank 1.5 percent month-on-month in August and spending among Japanese households fell a steeper-than-expected 4.7 percent. 

Life in the emerging markets isn’t faring much better.  Adding to the world-wide misery is Russia.  Russia is suffering from its involvement in the Ukraine, resulting with both U.S. and European Union imposed sanctions.  Investors are now frantically pulling money out of the country. Demand for dollars and euros is growing among Russian companies locked out of western debt markets as they contend with $54.7 billion of debt repayments in the next three months; leaving the rubble under severe pressure. All this is exacerbated by the plunge in oil prices to their lowest level in more than two years–threatening to tilt the $2 trillion Russian economy further towards recession. 

Moving to the other side of the globe, we have Latin American economies that are also in, or teetering on recession.  Brazil’s economy, post-world cup, is on life support, its one hope being that President Rousseff, the Marxist and former guerilla, doesn’t win the election.  A win for her seems likely, even though Brazil’s economy is officially in recession. The second quarter’s GDP took a huge downturn, contracting 0.6 percent from the first quarter.