When EM sneeze, developed countries catch a cold

global

Canada and Australia are good examples of this trend. Perceived as solid economies, yet their GDPs unexpectedly decreased in Q2 2015 alongside Brazil.

Ms Lagarde’s statements on a potential slowing of global growth were backed by Bloomberg analysts. They already consider the global economy will grow by 3% compared with the 3.3% estimated by IMF in July and 3.4% in 2013 and 2014.

And in fact, some of latest data is pointing in that same direction. A good example is Canada’s economy, according to Spanish experts at Intermoney. Canadian GDP accumulates two consecutive negative quarters with a drop of 0.5% in Q2, while Q1 figures were revised downwards from -0.6% to -0.8%.

The key to the deterioration lies in the oil sector downturn and, mainly, in the decline in margins. It also explains the strong decrease in infrastructure and capital goods investment: -12.0% in Q2’15, -17.7% in Q1’15 and -2% in Q4’14. But this compares with consumption and investment growth in the rest of the sectors, as well as improved estimations for Canada’s GDP in June by +0.5.

Australia also makes a case for markets’ concern. The country’s GDP declined by 0.2% in Q2’15, partly foreseen figures by Bloomberg analysts and going back to Q2’13. Despite Australia’s central bank holding interest rates at a 2% minimun level, exports are still weak (-0.7% ), as is private investment. Australia’s positive evolution is essentially supported by consumption (0.7% trim.).

The background doesn’t change, and doubts will probably be reinforced by the sharp decrease in Brazil industrial production in July, calculated at -6.2%. This time the central bank will alleviate pressure by maintaining rates at 14.25%,” analysts at Intermoney said.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.