- Investor Kyle Bass says "real growth might go to zero."
- UBS’s construction research shows the market for escalators and elevators has gone into stagnation — implying that large building construction is losing steam.
- AJ Bell noticed that freight shipping in the US suddenly went negative.
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There is no shortage of people worrying about an imminent downturn in the global economy. Here’s Kyle Bass, the founder Hayman Capital Management, telling the Financial Times, "Growth numbers are going to come down and real growth might go to zero."
But what does the data say?
Two recent data points from the "hard" economy — the world of actual things being built and real objects being shipped — show Bass might be right.
First, we spotted this chart in UBS’s deep-dive into global construction. For the last three years, there has been no growth in the construction of elevators and escalators — and the data shows no growth is forecast through 2020. The market for really big buildings has cooled, in other words.
UBS analyst Guillermo Peigneux Lojo and his team say they are seeing strong infrastructure spending, "but a global synchronized slowdown in residential and non-residential [construction] – resulting in a no-growth environment after almost a decade of recovery and over 5% p.a. growth."
The slowdown in China is already having a global effect, he says.
Second, the Cass Freight Index shows shipping in the US fell off a cliff at the end of last year and has gone negative in 2019. Fewer goods are being sent from A to B. That’s a bad sign, obviously.
AJ Bell / Cass
"Shipments fell for the seventh straight month in June," according to AJ Bell, the investment house. "Trade tensions with China (and other commercial partners) are having an effect, especially as the sugar rush created by the December 2017 tax cuts starts to wear off."
Freight is an early warning signal, AJ Bell believes. "The start of a slump in freight traffic, as measured by Cass, in 2000 and 2007 heralded both a wider slowdown in US economic activity, as benchmarked by the ISM’s manufacturing purchasing managers’ index, and eventually a bear market in stocks."
That dovetails with Markit’s Purchasing Managers’ Index, which shows that globally, manufacturing may already be in contraction:
Oxford Economics / Markit
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