Their greatest source of economic activity -- exports -- seems to be slowing dramatically. The main culprit appears to be a weakening Europe; however, our current spending slowdown may not be helping the situation.
China recently reported that its exports grew by a meager 1 percent year over year last month, with exports to Europe declining by 16 percent. This followed a disappointing credit expansion of only $85 billion, when it was expecting $100 billion.
Major exporting countries such as Australia and Canada may begin to feel the pressure soon.
This slowdown in China could be all the fuel the Fed needs to help push through another round of quantitative easing at its upcoming meeting in Jackson Hole, Wyo.
On another front, we appear to be having a run-up in corn and soybean prices. The widespread droughts that have affected a large portion of U.S. agriculture have been taking their toll on production and seem to be driving up the commodities prices globally.
The United Nations is taking this very seriously and is concerned about the large role these crops play in the world’s food supply. It has even begun asking the U.S. to stop using corn to produce ethanol so there would be a larger supply for consumption.
This uptick in commodities will probably have the opposite effect on the ability of the Fed to push through its agenda of another round of quantitative easing.
It seems the jury is still out on whether we will be seeing more Fed help to our current situation. Add to that the fact we are only months away from the presidential election that could bring a new president (and perhaps a new chairman of the Federal Reserve), and you have the makings of a pretty interesting economic scenario unfolding.