International Economic Week In Review: A Good Friday Shortened Week, Edition

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Includes: DBJP, DBUK, DXJ, DXPS, EWJ, EWU, EWV, EZJ, FJP, FKU, FXJP, HEGJ, HEWJ, HEWU, HFXJ, HGJP, JEQ, JPN, JPNH, JPNL, JPP, JPXN, QGBR, RINF
by: Hale Stewart

Add the Dallas Fed to the list of organizations arguing for weaker global growth. Their latest International Economic Update reported:

Global growth is slowing (Chart 1). Fourth-quarter real gross domestic product (GDP) growth in emerging markets was below 4 percent, its lowest level since 2003, except for during the 2009 recession. Advanced foreign economies slowed as well; consequently, global GDP growth is at its lowest since 2009. This global slowdown made U.S. exports to emerging markets decline considerably, while exports to advanced economies grew slightly.

The report contained the following graph:

Advanced economies (the red line) were lower at the beginning of 2013, largely as a result of the Greek debt issues in the EU. But their current level is hardly confidence inspiring. Emerging economies (blue line) present a bigger problem, because their growth rate continues to move lower. And with weaker Chinese growth, Brazil and Russia in a recession and weak commodity markets, there is little hope for that trend to reverse. Adding to the problem is the fact that the emerging economies now account for a larger portion of global GDP, meaning their slower growth has a larger impact on global GDP. All told, the above graph adds to the substantial evidence that global growth continues declining.

Markit's flash estimate was the only major news from the EU. The composite rate was 53.7 - the highest level in three months. The service sector number was 54, while manufacturing was 51.4. Germany's composite reading was 54.1, but manufacturing was barely positive at 50.4. And new manufacturing export orders stagnated. France's composite reading was 51.1, but manufacturing contracted (49.6), with new manufacturing orders declining as well. The data points to continued weak growth for the euro area.

Japanese news continued to disappoint. Markit reported a flash manufacturing number of 49.1. Production and new orders were down, and output contracted for the first time in 8 months. Worst of all, international demand was weaker. On top of that, inflation remains near 0:

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One of Abenomics' primary goals was to lower the yen's value to spur international sales and create inflation. Neither event is happening.

UK news was positive. Inflation was .3%, continuing its trend right about the 0% level:

Retail sales were strong, increasing 3.8% Y/Y. Most importantly, the 3-month rate of change is still strong.

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The UK remains in good shape, but they'll take a large hit if they leave the EU.

There wasn't enough data this week to form a firm conclusion.