Monday, March 14, 2011

The Slumping IC in BRIC: January 2011

Looking deeper into today’s OECD Leading Indicator release, one notable trend, namely the near simultaneous slowing of India and China, sticks out as very important development when considering macro-economic conditions going forward.

One theme that has been spun numerous times since the lows of March of 2009 is that outsized growth in the BRIC (Brazil, Russia, India and China) emerging economies would provide the global economy the boost it needed to shake off the malaise of the collapse and maintain an ongoing expansion.

It could easily be argued that investor enthusiasm for the speculative potential in these hot economies (along with the suspension of mark-to-market accounting and a few trillion here and there from the Feds) did, in fact, help to turn the trend during the dire days of early 2009 but many have taken the idea of these emerging economies actually driving the global economy with a “grain-of-salt” especially considering that the combined GDP of the BRIC countries is still just roughly $9.5 trillion, that compared to the United States $14.5 trillion.

Well in any event, it looks like two key BRIC economies… the I and the C… are seeing some notable slowing in recent months.

Both India and China are seeing a continued slowdown with economic activity in China currently declining 0.93% on a year-over-year basis while India has seen a 1.38% decline over the same period.

Even if a slowdown in these emerging markets lacks the potential to put the breaks on the entire global expansion, keeping an eye on these trends could prove vital as any “flight to safety” coming as a result of their degradation could have a notable… positive… impact on investment in the US.