3 Indicators Suggest Global Economy Is Headed The Wrong Way In 2019

3 Indicators Suggest Global Economy Is Headed the Wrong Way in 2019

iStock.com/JONGHO SHIN

China’s Manufacturing Says the Global Economy Could Be in Trouble

Let’s get this straight; the global economy is slowing down. Don’t be shocked if 2019 is the year a global economic recession becomes a reality.

This warning is not from a gut feeling, there are indicators backing this argument. For instance, look at the Chinese economy, the second-biggest economy in the world, as one indicator.

In December 2018, manufacturing activity in the country contracted for the first time in 19 months. The index tracking manufacturing activity in the country, Caixin/Markit Manufacturing Purchasing Managers’ index (PMI), dropped to 49.7 in December. A reading below 50 means manufacturing activity is contracting.

Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin, said, “It is looking increasingly likely that the Chinese economy may come under greater downward pressure.” (Source: “Caixin China General Manufacturing PMI™,” Markit Economics, January 2, 2019.)

You see, China is also referred to as the “factory” of the world since it produces so much and exports heavily around the globe. If the manufacturing activity in China is slowing down, it’s a very clear sign that the demand in the global economy could be slowing down.

Industrial Stocks Foretell a Scary Tale for the Global Economy

Not convinced that the global economy could be headed for trouble? Look at the chart below.


Chart courtesy of StockCharts.com

The chart above plots the price of iShares Global Industrial ETF (NYSEARCA:EXI). Essentially, it’s an exchange-traded fund (ETF) that tracks the performance of industrial stocks globally—companies that produce goods used in construction and manufacturing.

Industrial stocks tend to register anemic performance before and in the midst of economic slowdowns.

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