Eurozone Growth Slows to 4-Year Low, Italy Stagnates, Global Recession Risk Up


Eurozone growth slows to 0.2%, a four-year low as Italy stagnates. CEBR says risks of a global recession have risen.

Massive Disappointment

Annualized Growth Downgraded

Note that Eurozone quarterly results are not annualized, unlike the US. The reported 0.2% in the Eurozone would equate to a report of 0.8% to 0.9% in the US.

Risks of Global Recession Rising

The Guardian has Live Coverage of Eurozone GDP.

> Alastair Neame, senior economist at economics consultancy CEBR, is concerned that Germany’s economy has faltered over the summer.

CEBR Comments

  • “Eurozone growth of 0.2% in Q3 is the slowest rate of expansion since Q2 2014, which indicates that, amongst a range of risks, global trade worries may be having a bigger effect on business confidence than had been expected. With French GDP growth having risen to 0.4%, German growth is now under the spotlight as the currency bloc begins to stagnate.“
  • "Despite Germany showing some signs of labour market strength, as unemployment fell to the lowest rate since 1990 (5.1%), the economic outlook is somewhat clouded. The latest business surveys indicate that economic sentiment in Germany has waned as a result of growing global uncertainty. The Ifo business climate index fell for the second consecutive month to 102.8 points in October."
  • "Cebr estimates that the risk of a global recession in the next two years has risen from a fifth a year ago to a third this autumn."
  • As global business cycles mature, trade conflicts and emerging market crises could combine to tip the world into a downturn exacerbating the Eurozone’s problems.

Persistent Brexit uncertainty and Donald Trump’s trade wars are both being blamed for derailing to derail the eurozone recovery.

Rome’s borrowing plans already breach EU rules; if the economy is smaller, then the deficit will be an even larger share of GDP.

Global Recession Definition

The CEBR did not define, at least in those comments. There is no widely agreed upon definition.

Wikipedia notes "Before April 2009, the IMF argued that a global annual real GDP growth rate of 3.0 percent or less was "equivalent to a global recession". By this measure, there were six global recessions since 1970: 1974–75,[1980–83, 1990–93 1998, 2001–02, and 2008–09.

I would use a tighter definition of 2.0% or less.

I expect a global recession and the US will not be immune. China did not decouple in 2007 and the US will not decouple in 2019.

The Fed does not see this coming.

Mike "Mish" Shedlock

Comments (5)
No. 1-3

"The Fed does not see this coming."

After the housing bubble, Greenspan said that they knew it was a bubble all along. There is no reason to trust what the FED claims they do or don't see. When Greenspan innocently warned of irrational exuberance, the stock market dumped. He was careful not to spook the market after that.

After he left office, Bernanke lamented that no banker was referred for punishment, when Bernanke had the power to refer. He deliberately never used it. There was nothing for him to lament.

Bullard manipulated the stock market when it was dumping in 2014, by saying that QE shouldn't end, jumping the market to new all time highs, then after QE ended and Japan jumped in to take over QE, Bullard said his earlier remark was misunderstood.

When ZIRP crushed savers month after month, year after year, Yellen claimed that savers wear many hats, as a false excuse to continue crushing savers.

When QE ended, Yellen was asked when she was going to start raising rates. She said in a few months. When that caused a stir, she backed off her previous remark.

Well after the fact, the FED admitted it front loaded a huge stock market rally.

What does the FED know and when does it know it? Inquiring stock trading algos want to know.


The Fed had to raise rates eventually. Banks and businesses should have realized this and prepared for the day of reckoning. Instead they got greedy and many corporations balance sheets are littered with debt marked as cash. Worse yet many of these businesses will never pay back their investors who put money in via corporate bonds. As Mish use to say in 2007, the party is over and many will not survive the hangover.


The other way to look at this is the problems solved using the tools of the last crisis form the seeds of the next crisis. There was no reason for the Fed to keep low rates through the 2000s and it caused bubbles along with loose credit policies by banks. If more loosening of lending regulations occurs expect the same very soon as Trumponimics thinks more tax cuts will solve all problems. The problem is government spending now causes 8x more debt. The day of reckoning is getting closer by the minute. There any soft landing. This time it will end badly as Rogoff and Reinhart said. The debt must be dealt with.

Global Economics