Written By Basilio Chen

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USA stable but not strong (2.5%), Europe stable but anemic (1.1%), Chinese GDP is lower but still strong (7.3% with ranges from 7.2% to 7.5%), Brazil improving (1.8%, from 1.0% however confidence is waning).  (Bloomberg).

The USA economic recovery is predicted by KKR Global to remain at work until 2017. However, it is not expected that major crisis would result in severe deterioration because the crisis was created in a single sector that grew to bubble proportions, at the moment there is no single sector growing, there is more uniformity (“the worst is over” idea, this time) (KKR Global)

On the longer horizon, the Chinese economy is structurally slowing and changing at the same time.  Exports continues down, internal consumption is increasing, government spending is down, infrastructure projects and investments are increasing.

These are the result of several drivers:

  1. Anti-corruption initiatives;
  2. Forced decline in lending back towards nominal GDP growth; and
  3. Increased competition across many of China’s export due primarily with rising cost of labor.

Manufacturing in Developed Markets is Up While in Emerging Ones is Flat

Shows manufacturing improvement in developed countries (less imports needed) while emerging countries (sources of imports) have reduced manufacturing.  In particular, China’s prior brand as the “Manufacturer of the World”, is no longer the case.  In summary, this chart below shows, more production in develop countries versus less exports in emerging countries, China in particular.

 

Inflation (as measured by CPI) Rising In Emerging Countries Since 2012 While Falling in Developed Countries.

Increase prices of products and labor in emerging countries contributes to increase in production cost of emerging countries making them less competitive compared to developed countries.