Indicators Of The Impending Economic Slowdown

The indicators of global economy are yelling economic slowdown ahead, but they are being ignored.

Consider the chart below of the S&P GSCI Industrial Metals Index:


This index tracks the price of industrial metals like copper, zinc, aluminum, nickel, and lead. The S&P GSCI Industrial Metals Index continuously declining suggests these metals aren’t being used as much—factories are not operating at their full potential in the global economy.

The reality is that the demand in the global economy is slowing down. According to Deutsche Bank and Macquarie Group, between 2013 and 2015, copper supplies are expected to exceed the demand by an average of about 500,000 metric tons a year. (Source: Wall Street Journal, June 25, 2013.)

The economic slowdown in the eurozone is still taking a toll on the global economy. Unfortunately, I think there’s more to come as the bigger nations in the common currency region—Germany and France—are showing signs of stress.

China, the powerhouse of the global economy, is witnessing an economic slowdown like never before. In 2012, the country performed poorly, and this year, it’s expected to do the same. China’s exports are hurting, manufacturing is struggling, and the amount of credit is becoming troublesome.

As I have been harping on about in these pages for some time now, the implications the economic slowdown in the global economy could have on the U.S. economy are very vast. We are not an island nation, immune to the troubles in the global economy. We trade with other nations.

Unfortunately, as the demand declines in the global economy, U.S. companies will suffer. They will be selling less. As a matter of fact; the first-quarter 2013 revised gross domestic product (GDP) reported by the Bureau of Economic Analysis (BEA) showed that exports from the U.S. economy actually declined. In the first quarter, real exports—adjusted for price changes—decreased 1.1%. In the fourth quarter of 2012, exports declined 2.8%. (Source: Bureau of Economic Analysis, June 26, 2013.)

As the economic slowdown continues to take a stronger grip on the global economy, I wouldn’t be surprised to see U.S. exports decline even further. Looking at the economic conditions worldwide, I don’t hold a view that suggests there’s prosperity ahead anytime soon—we have a long way to go. My advice: don’t believe the key stock indices; they are far beyond reality, and they’re doing a masterful job at luring in even more investors.

Disclaimer: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis. The opinions in this e-newsletter are just that, opinions of the authors. Information contained herein, while believed to be correct, is not guaranteed as accurate. Warning: Investing often involves high risks and you can lose a lot of money. Please do not invest with money you cannot afford to lose.

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