Global Economy Woes: Sluggish Growth



Global Economy Worries as Recovery is Slow

Global Economy Worries as Recovery is Slow

Shares in European and US markets have fallen as concerns have grown about debt levels in the eurozone and the global economy. The indexes in Paris and London dropped by about 2.5% and in Frankfurt it was down by 3.5%. New York also saw a fall of 1.2% after disappointing US service sector information from the Institute of Supply Management, which showed that the sector grew at its slowest pace in 17 months through July.

 

The price of gold hit a record high. Gold is seen as a safe investment in financial uncertainty. It hit $1,669 an ounce early in the trading day. This is a new record for the price of Gold.

 

Additionally, the Swiss National Bank lowered targets for inter-bank lending, in order to try and lower demand for the Swiss franc. The Swiss franc is yet another safe investment, and demand has risen recently.

 

Commerce Department figures showed that factory orders in the US fell in the same month as the slow service sector growth and oil prices fell. US light crude dropped to $92.91 a barrel and Brent crude dropped to $114.85 a barrel.

 

Asian markets had closed lower as well, with Nikkei in Japan down 2.1% and Hong Kong’s Hang Seng lower by 1.9%. This contributed to the global sluggishness and a bleak outlook according to experts.

 

In Spain and Italy, government bond yields rose, which mean a greater risk in lending to both countries. The services sector in the eurozone also experienced a slower growth with the Markit Services PMI index to nearly a two-year low of 51.6, 2.1 less than in June, meaning that the UK, eurozone, and US all have slower service sectors for July. Anything above 50 indicates growth, but growth worldwide is slow.

 

Michael Hewson at CMC Markets in London worried about the health of the economy, saying, “”Disappointing economic data on both sides of the Atlantic, as well as surging Italian and Spanish bond yields, has seen risk appetite plummet as pessimism about the global recovery starts to take hold with a vengeance.”

 

Koichi Ono from Daiwa Securities Capital Markets in Tokyo felt that the focus had turned from the crisis involving the US Debt Default to wider concerns about the economy. He said, “I think the conditions have completely changed this week.

“Until last week, people have been saying the US debt ceiling was the problem. Now they talk about worries about the health of the economy.”

 

The uncertainty about debt in the eurozone combined with decreased consumer spending in the US, which fell for the first time in almost two years, expands the lack of confidence about the economy.

 

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