According to The Wall Street Journal, warning signs for a global economic slowdown are popping up abroad. In the second quarter, economic output fell in Germany while in China, factory output was lower than predicted. Germany and China are the fourth and second-largest
economies in the world.
“It’s almost like we’re starting to see a textbook version of a pre-recessionary period,” Nicholas Akins, chief executive of Ohio-based American Electric Power Co., said.
The slowdown could eventually reach the U.S. and according to some experts, if a recession does come it will come from lower business investment. Corporate earnings and investments are already falling. In the first quarter, corporate profits were down 2.2% as opposed to a year before.
Allen Sinai, a forecaster at Decision Economics, said “I think the trade thing is a big policy error.” He said that President Trump’s tariffs are detrimental to the U.S.
The trade war has caused uncertainty in global trade, which has led to a slowdown. Both China’s and Germany’s economies are dependent on exports, which means any trade disruption will have an immediate negative effect for those countries. Meanwhile, in America, trade uncertainty is leading to investment uncertainty.
“It’s no secret that, given the level of uncertainty right now around [a] number of issues globally that—from the standpoint of business tentativeness that we’re certainly seeing more of that right now,” E. Scott Santi, chief executive of Illinois Toolworks Inc., said.
Still, low unemployment and higher incomes mean that if a recessions does hit, consumers will be better equipped to handle the fallout.
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