Tuesday, 8 November 2005

Growing recession risk?

Yesterday, the Federal Reserve reported that consumer credit was unchanged in September. Total consumer credit outstanding edged down to a seasonally adjusted US$2160.1 billion from a revised US$2160.2 billion in August.

Slowing consumer credit growth is one reason that John Hussman warns of a "growing risk of recession" in his latest weekly market comment.

It is also not all clear for the Japanese economy, despite its continuing expansion. Yesterday, the Cabinet Office released its preliminary indexes on business conditions, showing that the index of coincident economic indicators stood at 55.6 percent in September, down from 80.0 in August, while the index of leading indicators fell to 50.0 percent from 100.0 percent in August.

And it is little better in Europe. Yesterday, Eurostat released a report showing that the volume of retail trade in September fell by 0.4 percent in the euro-zone and 0.1 percent in the EU25.

On the other hand, a Bloomberg measure of retail sales in the euro-zone did rise to 50.4 in October from 49.7 in September, although sales were down from a year earlier, according to a Bloomberg report. The report also mentions that industrial production in Germany increased 1.2 percent in September from the previous month but factory output in the UK shrank for a second month September, falling 0.3 percent from August.

Investors who are put off by such news and are thinking of investing in Asia ex Japan might want to read this report by Morgan Stanley's Andy Xie first.


Gerbert said...

According to retail trade data, Europe does not seem that bleak to me as you suggest. Instead of monthly changes, as you look at, year-on-year retail trade was up by 0,9% in September. Other positive news can be found in confidence indicators and leading indicators of the German economy.

lim said...

It's true that the year-on-year change was up 0.9 percent in September, but that itself is down from 1.4 percent in August.

Having said that, I agree that things aren't that bleak in Europe, as I highlight in other parts of the blog.

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