With the dollar on the rise, commodities prices keep declining –having already fallen by 6% this year. Oil is trading at below $98 a barrel, copper reached its lowest price in three months and iron is down to a 5-year low. Gold and silver are also at the lowest levels seen in months.
Strong falls in commodities prices show investors are worried about global economic growth. Almost all large economic regions are in jeopardy.
The US economy grew at over 2%, although consumption continues to stall with as the labor market suffers from certain inefficiencies. China is failing to keep apace with previous growth figures while Japan is struggling to take-off despite the Abenomics shock measures.
Emerging countries are scarcely any better. The Brazilian economy, the seventh largest in the world, is technically in recession. It shrank by 0.6% in the 2Q and -0.2% in 1Q (revised). Except for one quarter in 2008, Brazil’s growth had always been positive and over the global average, around 4% yearly between 2003 and 2010.
And finally, we get to the Eurozone. Consumer confidence fell in September once again, despite the action package established by the ECB (TLTRO, ABS purchase, rate drops etc). Draghi insists that his measures will need some time to prove their effectiveness but they will not be enough without national structural reforms and fiscal incentives. Mr Draghi sent this message to central bankers in Jackson Hole and repeated it before the European Parliament on Monday.
Draghi has repeated that Eurozone economic recovery is losing momentum.
“After some quarters of expansion, Eurozone growth and real GDP reached a deadlock in the 2Q”, he asserted.
Economies in the eurozone need reforms yet they can also benefit from a strong dollar thanks to the Fed’s monetary policy changes. A weaker euro favors exports, but still, it doesn’t sort out all problems.