Friday, November 14, 2008

China Slowdown: A Drag On Global Growth

A large player in the global/emerging growth story has been China's economic growth. Just as China was instrumental in the growth of the emerging markets, the countries recent slowdown is impacting global economic growth as well.

(click chart for larger image)

The China government may report economic data in a more favorable light than what is actually occurring in the country. Consequently, growth could be much slower than reported. On Monday, China did announce a $586 billion economic stimulus package. This is an indication of how slow the GDP growth is in China. A few recent posts touch on the real impact China's slowdown is having on factories and unemployment.
One index to watch that might provide a clue to a pickup in global growth is the Baltic Dry Index. As the below chart notes shipping prices have declined significantly over the last several months. This is an indication that demand has fallen for overseas shipping vessels that often transport important commodities like iron ore and coal. More information on the Baltic Dry Index can be found at the below link.

Baltic Dry Index chart Nov

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