The US economy has failed to improve over recent months, and at the same time the Australian economy is slowing due to weakness in Asia. This begs the question of whether or not a Recession is just around the corner? Investors certainly are starting to panic.
US Federal Reserve chairwomen Janet Yellen released the Federal Open Market Committee (FOMC) monthly statement on Wednesday, downgrading their view for the US economy. Over the last year, the FOMC has hinted towards a point in time when they would raise Interest Rates, which has caused the US Dollar to rise substantially. But the world’s benchmark currency has started falling as it becomes more apparent that an interest rate rise is not likely any time soon.
Globally, the economic picture is not very rosy.
- Despite the problems stemming from Greece, the Eurozone remains in a weak state with latest figures showing a 0.9% annual GDP growth rate. This had been negative up until late 2013, clawing its way out of a Recession. Inflation has been negative for the last few months, reflecting a contracting economy.
- With the strongest annual GDP growth rate of any nation in the world, China is still considered to be in trouble. Over the last year, we have seen a decrease from 7.9% to 7.0%. The impact to major trade partners is clearly evident.
Analysts are now discussing what opportunities lie ahead.
Following the GFC of 2007/08, the US economy had experienced growth on the back of years of Quantitative Easing (QE), or stimulus measures. With that program ending last year, the economy has failed to improve substantially. In essence, it is failing to improve on its own two feet. And without any additional reason for economic improvement, may require further stimulus to start growing again.
Europe and Japan have recently adopted QE programs in an effort to boost their economies. This should reflect how desperate they are for growth. Through the US QE programs, it has been proven that this does help the economy, but must be continued until such time that the economy can independently grow on its own. And how long will that take?
Australia, on the other hand, has been heavily reliant on the growth of China in recent years. Now that this boom has come to an end, the government is undergoing campaigns to create new industry income through fields such as Medical knowledge and technology.