– IMF warn of “fresh financial crisis”
– German exports fall 5.2%, largest slump since recession of 2009
– German imports also fall 3.1%
– Many sectors across German economy see unexpected declines in factory orders and industrial production
– UK Chief Financial Officers (CFOs) report sharp rise in uncertainty
– UK PMI has fallen to lowest level since April 2013
– Hope for the best but be prepared for less benign scenarios
The IMF have been growing more vocal in recent weeks about the possibility of another financial crisis and severe recession. The head of financial stability at the IMF, José Viñals has said that this outlook “does not rely on extreme assumptions at all”.
IMF head, Christine Lagarde has said that the slow down now being seen in China and other large emerging markets will cut economic growth globally back to levels last seen during the crisis of 2009.
In its financial stability report the IMF said:
“Shocks may originate in advanced or emerging markets and, combined with unaddressed system vulnerabilities, could lead to a global asset market disruption and a sudden drying up of market liquidity in many asset classes.”
Just this week, we covered the similar stark warning from the BIS, the central bank of central banks, who warned of “major fault lines” in the global financial system and a “global debt bubble“.
Germany’s manufacturing industry, Europe’s biggest industry in the EU’s largest economy, is taking a hit from sharply slowing demand in emerging markets and developing markets.
It is believed that the turmoil being experienced by German flagship companies Volkswagen and Deutsche Bank and geopolitical uncertainty in the Ukraine and Middle East and tensions with Russia are contributing factors to the malaise.
The situation is more that just a crisis in confidence. Major chemical company BASF SE has announced a curb in spending and reduced profit and sales expectations going forward. Bloomberg also cite a German steel industry report which shows that “crude steel production fell almost four percent in September.”
Meanwhile in the UK, there are also signs of a sudden economic slowdown.
The purchasing managers index (PMI) in the UK as compiled by Markit has fallen to its lowest level since April 2013 at the height of the sovereign debt crisis.
“Weakness is spreading from the struggling manufacturing sector, hitting transport and other industrial-related services in particular. There are also signs that consumers have become more cautious and are pulling back on their leisure spending,” Chris Williamson, chief economist at Markit, said according to Reuters.
Another sign of the slowdown in the UK is a survey by Deloitte showing that the “chief financial officers (CFOs) of some of Britain’s biggest companies reported a sharp rise in uncertainty facing their businesses,” according to the Guardian.
Full article: Global Recession Coming – Even “Powerhouse” Germany and UK Slow “Dramatically” (GoldCore)