Sunday, February 19, 2012

The Global Economy

During the last 12 months the Dow (DJI) reached a low of 10,655.30 points in October of 2011and hit a high of 12,949.87 last Friday.  Will the Dow hit 13,000 next week?  Does this rally have a little more juice left? 

How healthy is the global economy?

According to the World Bank our GDP makes up 23.52% of the world economy.  Our unemployment rate has gone down to 8.3% and our consumer confidence is at 61.10.  Our inflation rate is at 2.90% and our interest rates at 0.25% which has been punishment for anyone that is staying conservative and not investing.

The Eurozone's GDP makes up 20.09% of the world economy.  The Euro Area's unemployment rate is at 10.40% consumer confidence is at -20.7.  Their inflation rate is at 2.00% and their interest rates are at 1.00%.  The Euro Stoxx 50 reached a 12 month low of 1995.01 points in September 2011 and a high of 3013.09 points in February of 2011 the index is currently at 2520.31 points.

China's GDP currently makes up 9.48% of the world economy.  Their unemployment rate is at 4.10% and consumer confidence at 97.00.  China's inflation rate is 4.50% and their interest rates are at 6.56%.  The Shanghai Composite Index which is a major stock index reached a 12 month low in January of 2148.45 points, it currently trades at 2357.18.  The world seems to be counting on China to continue its healthy growth yet some believe it will slow down a bit.  General Electric (GE) which has operations in China believes the slow down will be manageable and will not have a strong effect. 

The FTSE 100 the major stock index for the U.K. is currently trading at 5095.07 and their unemployment rate is at 8.40% with consumer confidence of -29.00.  Their inflation rate is at 3.60% and interest rates of 0.50%.  The U.K. is going through tough times right now, about 40% of them believe the Eurozone will break up on the other hand in the U.S. about 20% believe the Euro will cease to exist.

The Nordic countries have not been spared Sweden has an inflation rate of 1.90% and has abandoned interest rate increases for the rest of the year as the European debt crisis has spread like cancer moving now towards the north.  The slow growth predicted for the year has led the Swedish to start saving more and to start consuming less.  The failure of European leaders to put an end to the debt problem has affected even the strongest economies in Sweden.  Problems in the Eurozone has lowered demand for Swedish exports.  Sweden which is home to some of the biggest companies in Europe will see those companies begin to trim down their workforce to adjust to the weaker economy.

Can the U.S. and China hold the house down?  Europe appears to be in a recession, will our growth and that of smaller countries like Brazil be enough to avoid a global economic slowdown?

It is expected that European finance ministers will approve a 130 billion euro bailout for Greece to avoid a default.

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