Synchronized free fall. The global economy is sliding ever deeper into recession. Supply and demand are plummeting. Industrial production is even in a free fall – not only in the industrialized world, but above all in Emerging Asia. The auto industry is particularly hard hit worldwide.
Negative records. At a mere ¼%, real global GDP on a purchasing power parity basis will "grow" this year at its slowest pace in the post-war era. At market exchange rates, global economic output will even shrink for the first time since WWII!
US & EMU. Investment and exports plummeted dramatically at the turn of the year. For Q4 2008, we expect real GDP to contract at annual rates of up to 6% (cf. chart)! And the current quarter is unlikely to be much better (pages 4-6 & 10-14).
Economic policy. New fiscal stimulus programs in the billions, coupled with rate cuts and massive infusions of liquidity, can at best contribute to stabilization further down the road. We see no chances of a rapid, V-shaped recovery.
Deflation? Plummeting oil and commodity prices, combined with the ever-widening output gap, are at the same time fueling fears of deflation. At mid-year, headline inflation in the industrialized world will indeed slide into negative territory – but only temporarily.
Further topics:
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Weekly Comment: Quicksand syndrome (page 2).
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US: Obama’s fiscal stimulus package and its growth impact (page 7).
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Northern Europe cannot escape the global recession (page 15).
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Data outlook: EMU growth expectations decline further; US housing market still in recession (page 18).
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Market outlook: EUR to remain under pressure; government bond yields to decline further (page 24).
