Bad Omens For The World Economy

The world economy seems to be going from bad to worse without a glimpse of light anytime soon for me those are the 5 most important factors that the outlook for the world economy is so bad.

China's Excess Supply and Economic Struggles

China has been the world’s manufacturing powerhouse for decades, the Chinese government has pushed for industrial growth over everything else this lead to an overproduction in key sectors like steel, cement, coal and the whole industrial production. At the same time the country’s real estate sector is in a tailspin. Giant property developers like Evergrande have been defaulting on debts, causing ripples in the global financial system. With housing accounting for a significant portion of China’s GDP, any downturn in this sector has widespread implications. According to the World Bank, China’s GDP growth slowed to just 5.2% in 2023, down from the double-digit figures of previous decades. This cocktail of problems means that the internal consumption is dropping and the excess production must be given abroad mainly in Europe resulting in harder competition for the European Industries.

China is exporting more with lower prices.

https://www.imf.org/en/Blogs/Articles/2024/09/12/trade-balances-in-china-and-the-us-are-largely-driven-by-domestic-macro-forces

US and European Trade Policies

Harris Or Trump? It matters not in the trade war between US and China both parties will implement policies to reduce imports from China Under the banner of securing national interests, the same goes for Europe , both regions have ramped up tariffs, enforced stricter regulations. The Inflation Reduction Act passed, is aimed at boosting domestic production of electric vehicles, renewable energy, and semiconductors but it is mainly aims to slow the imports from Asia and help US companies to compete . Europe is preparing to do something similar by adding tariffs in imported electric cars from China.

Rising Sea Trade Costs

One of the most pressing issues currently plaguing global trade is the soaring cost of sea freight. 80% of the world’s goods being transported via the oceans the cost of of shipping containers skyrocketed during the COVID-19 pandemic, the war in the middle east and the attacks of the Houthi is what maintains the trade prices extremely high. Before the pandemic the price to transport a 40-foot container to Greece was $1000-$1500 and today the cost ranges $8,540 to $10,950.

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Slowdown in Processing and Manufacturing Industries

Manufacturing has been slowing down in many parts of the world. The manufacturing Purchasing Managers' Index (PMI), a key indicator of economic health, has shown contraction across several major economies.

The reasons for the slowdown are manifold. First, rising costs of raw materials, fueled by supply chain issues and inflation, are making it difficult for manufacturers to maintain profit margins. Second, higher interest rates, a result of central banks' efforts to combat inflation, are dampening demand for goods that rely on borrowing, such as automobiles, machinery, and electronics.

Geopolitical Tensions

Russia’s invasion of Ukraine has severely impacted global energy and food markets. Europe, which once relied on Russian natural gas, has been forced to diversify its energy sources, leading to higher prices and energy shortages. Additionally, Ukraine, a major producer of wheat and other agricultural products, has seen its exports crippled by the war.

The war in the middle east seems to be escalating even more heading towards a multi-nations including Israel - Lebanon - Yemen and probably Iran if left with no choice. That means the prices of oil and freights transportation will skyrocket.

https://www.oecd.org/en.html

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