Nine Signs That A New Global Recession Has Arrived

Recession Signs Composite

Economists and policy makers in large countries and organisations like the International Monetary Fund and World Bank have expressed concern that the world has entered a global recession barely a year after the deep downturn of 2008-2009.

Research supports that this recession will not be short or mild.

The most obvious effects have materialised in the U.S., UK, EU and Japan. U.S. gross domestic product was sluggish at well under 2% expansion in the second quarter. Japan’s GDP fell 0.3% in the same period.

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 Germany, the bedrock of the eurozone, said its GDP rose only 1% in the second quarter.

The economic reality of these regions will seriously hamper the rapid expansion of the BRICs. The GDP growth in the BRIC countries is largely dependent on their exports to the developed world.

Recessions are generally measured by GDP contraction, but there are other indicators that are nearly as important. Global shipping capacity is one of these.

Civil wars are another because they can destroy entire national economies. The increase in the number of people who are malnourished is a marker for a global decrease in consumption of goods in the countries where the poorest live.

Household incomes generally fall in a recession, and unemployment either rises or stays at very high levels established in a previous downturn. Government spending should help stimulate business and consumer activity, but decreases in it remove the single most important safety net that a faltering recovery needs.

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1. Shipping

Shipping is a critical indicator of global financial health because so many of the world's goods travel by sea. This includes everything from crude oil to agricultural products to autos. Industry giant AP Moller-Maersk recently reported earnings and said demand had declined sharply. The latest data about dry bulk commodities-shipping costs, as tracked by the Baltic Dry Index, revealed that rates have fallen by a third so far this year. Hanjin Shipping, Orient Overseas and Mitsui OSK Lines have not been able to put into effect normal surcharges that go with peak demand periods, which is an important way that the industry makes money, according to Bloomberg. That is because there simply is not enough demand for the movement of goods from nation to nation.

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2. GDP Forecasts

Global economic organisations cut GDP forecasts simultaneously. The organisation for Economic Cooperation and Development's May report on GDP improvement among its member nations said the economic expansion had faltered and the decline was expected to continue into 2012. The IMF made similar comments in June. The World Bank also expects a slowdown in global expansion and warned that prices of commodities and oil could cripple any further expansion. Each of these groups is unrelated to the others, so the appearance of red flags from all of them is significant. Each also has the capacity to gather data from most countries around the world, which makes their research capacities unique.

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3. Oil demand falls

4. Stock markets retreat

The world's major stock markets retreat in lock step. The stock indices in virtually every major nation have had large sell-offs recently. Markets in regions where investors believe that growth will continue to be robust ought to at least trade at the levels they did in early summer, but none do. The Dow Jones Industrial Average and other major indices in the U.S. have fallen 15% recently. Germany's DAX has struggled after news that the economy there has slowed considerably, which had an impact on stock prices. The UK may already be in recession and its FTSE index shows this. France's CAC 40 is down as well. In Japan, the Nikkei is down more than 10% in the past month. The stock markets in the strongest regions economically should be doing better at least. But Hong Kong's Hang Seng is down over 10% in the last month, as is Brazil's Bovespa. The signals from these stock markets show that the slowdown has spread well beyond the developed world.

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5. Unemployment

6. Civil War

Effects of civil war. The battle to build democracy in Egypt has badly damaged the nation's finances, as many businesses have either closed or had sales damaged by the chaos in the country that has still not elected a new permanent government. The situation in Libya is worse, and the problem persists in other nations beset by unrest in the region. The effects are more than trivial. Egypt is the 40th largest economy in the world, based on GDP. Syria, Libya and Iraq are all in the top 70. Protracted civil unrest and the disappearance of an organised economy in these countries will continue to impact exports to these nations.

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7. The Poor

8. Government spending cuts

Economic expansion in the U.S., UK, Greece, France, Italy and Spain depends on government spending, to a large extent. That is especially so when the global economy is poor. Rather than increase spending, many nations have slashed their budgets. The eurozone financialcrisis is so bad that Greece, Portugal, Italy, Spain and the UK have all cut or pledged to cut government spending significantly to implement austerity programs. These are meant to offset rises in national deficits. The U.S. has begun a similar process, the first stage of which must be finished by November.

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9. Wall St. turns against growth

Walmart Keeps Huge Online Advantage

Walmart's domestic sales may have stumbled, but its online presence is still dominant. July Comscore figures show that Walmart's sites had 38.7 million unique visitors. That is nowhere close to the world's largest e-commerce company (NASDAQ: AMZN), which had 87.1 million unique visitors.

But, Walmart far outdistances is primary rival, Target (NYSE: TGT). The number two big-box retailer had 26.5 million unique visitors in July. No other bricks-and-mortar retailer joined these two on the top 50 list.

The news may be good for Walmart, but it is bad for rivals Costco (NASDAQ: COST), Best Buy (NYSE: BBY) and Sears Holdings (NASDAQ: SHLD), which owns Kmart and Sears. It is widely believed among analysts that e-commerce is the single most critical part of the retail industry, and that importance will only grow.

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