The US continues to expand its economy but this is not enough to stop the sharp volatility in the stock markets, the volatility in exchange rates and the flattening out of trade.
The IMF revised its estimates of world GDP growth in early October, not by much but it was the sentiment that counted.
As a result of public statements of concern about the direction that the European economies were headed and the reduction of estimated growth for both this year and next the stock markets collapsed, wiping out 2014 gains. It also highlighted the decline in German industrial production and the lack of consumer demand.
Despite the warnings, the German government continued its excessive loyalty to austerity measures and indirectly forced many of its Euro partners to do the same. Growth will not come from northern Europe, that is for sure. The exception is the UK, but it has also warned that it is not immune to events across the channel.
In the US growth remains and it is expected that the economy will continue to expand as unemployment drops below 6% giving the consumer enough confidence to reduce savings and to expand purchases.
What all this means for trade is that things will improve only slowly, and in Europe there is a distinct danger that another recession is on the way, the third in seven years. This in turn will result in reduced international trade, which is not stellar to begin with, to the point that excessive shipping capacity will continue to expand, which in turn will drive down earnings.
When supply exceeds demand then there is only one direction for prices (freight rates) to go and that is down. No economy of scale strategy will be able to deal with sharply falling prices.
And what does the future hold? Minor recessions come around every four to five years, major ones hit every eight to 10 years. This does not look good for 2016.
