One by One, National Economies Falter

The slowdown or reversal of the economic growth in countries is no longer limited to the weak EU nations, the U.S., and the UK. Japan cuts its forecast for 2011 growth to 0.5%, as near to a recession as GDP improvement can be. France reported that it had no GDP growth in the second quarter at all. The country blamed the problem on a lack of consumer activity.

Among the largest nations, only Germany and China are expanding rapidly. That is not enough to keep a global recovery on track.

The factors that would help a recovery have begun to fall away. Oil prices dropped to $80 and have rebounded by about $3. That is not sufficient to bring gasoline prices down to the $2.72 level, where they were in the U.S. a year ago. Petrochemical prices remain high, and OPEC has no reason to be of assistance. The treasuries of its members have already lost some of their income because of  the drop in crude.

The fall-off in French consumer activity comes after the U.S. announced its GDP growth for the second quarter was 1.3%. A recovery from that level in the second half is doubtful. July unemployment showed some improvement, but not enough to replace any meaningful portion of the jobs lost in the 2008 to 2009 period. Recent research from Reuters suggests that consumer confidence is at a historic low and that people are extremely concerned about the near-term future of the economy. The pervasiveness of unemployment certainly was a factor in that pessimism.

Germany and China cannot grow based exclusively on the activity of their own consumers. Germany said its exports declined in July for the first time in two years. China’s exports continue to be healthy, but if it is the only remaining healthy economy at the end of the year, its exports are bound to slow.

The hope for a recovery has begun to die country by country. 2012 will be an unexpectedly hard year, compared to forecasts of just a quarter ago.

Douglas A. McIntyre