Fears of an imminent global economic collapse are rising as the economies of China and the Eurozone continue to weaken.
China recorded a big drop in exports while European manufacturing sector sank to its lowest level of business activity in four years.
Data showed Chinese exports were down 4.4% in December – the largest fall since 2016. Imports fell 7.6% due to less than forecasted demand among Chinese consumers.
China’s results were the first sign to alarm economists whose fears have been compounded by an economic slump on the continent.
Eurozone manufacturing output also fell sharply in November.
The EU statistics office, Eurostat, estimated that industrial production slipped by 1.7% in November compared to the previous month and by 3.3% for the year. The decline strongly reflects the Eurozone’s economic slowdown in recent months.
These numbers should be expected after economies of key European countries continued to weaken during the past few months.
For quite some time now, the ongoing US-China trade dispute have ignited fears of continued volatility of the global economy because of its impact on global trade.
Although there are early signs of positive developments between Washington and Beijing, global economic growth has already taken a beating.
Financial markets around the world sold off sharply on Monday, with the FTSE 100 shedding about 70 points and losses on bourses across Europe.
Wall Street futures – financial contracts betting on future share prices – also indicated losses in New York.
Some economists have taken action to allay fears of a looming global recession by saying that problems which caused the Europe and China plunges could be temporary.
From Banda Szendrei, an economist at consultancy Oxford Economics:
“In Germany, November backlogs were at their highest, manufacturing orders were on an uptrend and unemployment was the lowest since 2008, supporting our view that industrial activity will improve.”
Meanwhile Christ Turner, head of foreign exchange strategy at ING in London, chimed the following opinion:
“With the Federal Reserve signaling a pause in the tightening cycle… we don’t expect China’s trade numbers to have a long-lasting negative impact on sentiment.”