Decoupling is Happening; Still Hope for Global Growth

Before investors become consumed with news re Citigroup, inflation reports, etc., here’s a little data point that you might find interesting.

In a report published yesterday by Credit Suisse, evidence of decoupling can be seen in two charts.

The first chart shows quite clearly that the US economy means far less to China than it had in the past. As for the second chart, Chinese domestic growth is not just strong but is actually accelerating.

Investment Strategy Implications

As the charts above show, there is ample evidence that decoupling is real. Therefore, while the US economy may suffer a recession, the global growth story appears to be intact. Maybe the end of the world is not just around the credit derivatives corner.

Comments

[J.D]

Wouldn't exports to the US be expected to slow if, say, the US economy was weakening and the US dollar was sinking versus other final markets such as the EU? Second graph shows Chinese inflation very nicely. Decoupling is a myth, see HK markets today. Also, here's some telling news:

www.reuters.com/articl...

[huangjin]

Retail sales are a lagging indicator. If production falls, consumption will follow, not the other way around.

[Kunst]

The world economy goes through cycles, each repeating the pattern but starting from a different point, the end point of the last cycle.

This is the last cycle where decoupling still doesn't fly. The "3rd world" is still too dependent on exports to the US and related economic activity to escape a US recession unscathed.

Next time it will be different. Not this time.