Germany, China, Axios discussed on Pro Rata

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We're joined now by axios markets editor dion ribaut and you wrote in your newsletter this morning turning specifically about germany. Why should people in the u._s. Particularly care about what happens with the german economy thing about the german economy. It's not particularly really important just in and of itself. What's important is what it says about what's happening in the world and germany's kind of bellwether for what's happening with all the export-driven driven economies the world. It's one of the biggest it's actually more of its economy relies on trade and exporting been even china's economy which people tend to think of when they think of an export economy so birmanie is basically slipping into recession right now their economy actually contracted in the second quarter and that's mainly because the trade war so even though they're not directly involved involved in the trade war it's hitting them so much in terms of their trade globally and particularly their trade with china their economy is actually starting to go into a recession explain that to me because a layman's argument would be well if china and the u._s. trade between the two has slowed because of the tariff or going back and forth then china german trade and arguably u._s. German trade should expand handwrite in theory yes but what happens is. It's a basic matter of supply and demand so if the chinese aren't getting the same amount of trade going with the u._s. West and they're slowing down. That's hitting everyone so you're getting a slowdown in demand for the chinese consumer which means they have less demand for everything but that's kind of where so you're seeing what you're seeing happen around the world to countries not just do us in china but all kinds of countries that are impacted by trade were right now in a manufacturing recession in the u._s. It's a small part of the economy but it's an important sector in terms of how much the u._s. deals with the rest of the world when you say we're gonna manufacturing recession. Is that a new thing intend to new to the trade war because obviously u._s. Manufacturing as a whole has been generally on the decline for quite some time it has what you're seeing is six straight months of declining mining manufacturing reports so literally when i say we're in a recession i don't mean like i think we'll be in a recession like declared recession as in two straight quarters of declining finding growth that's declining from year years so normally as we saw this kind of steady moved down in manufacturing over the past decade or so you would see even numbers kind of move up move down and it was the downward trend that's continuing. It's just accelerating down and you're seeing the industry actually contract here in the u._s. And you're seeing that basically around the world slowly <hes> the indicators of turning from the industry is growing or staying stable to its outright declining. He's you talked about the kind of those two consecutive quarters and that is the traditional definition of recession right two consecutive quarters of decline and that goes for the overall economy to we saw a decline in u._s. g._d._p. Between q one and q two what our expectations right now for q three because in theory of two three is lower than q two recession but again and this is the thing the the communists actually debate and i don't want to have that debate with you today <hes> because we have much more important things to talk about but if you're looking at a quarter over quarter if you declare declare a recession from quarter of quarter it's gotta be a decline in the overall company so even if we go from you know we went through three point one in the first quarter of two point one in the second quarter and then and let's say we go to one point nine the third that wouldn't be a recession because again. We're still growing year over year and still have been increased from were you were so some economists will say it can only be a recession if it's a year over year. If it's two year over year decline some economists say can quarter over quarter but you're still seeing growth growth in the u._s. No matter what germany actually their economy's contracting it's getting smaller outright and you're seeing that you saw last quarter in the second quarter and you actually saw that in the i think it was the fourth quarter of two thousand eighteen as well i would have to say i think there's a bunch of people running around iowa new hampshire right now who might disagree with you on that come a couple of months from now but we've seen massive volatility in stock market. We had a very bad june. We had a very good july and august has been lousy including the worst actually into the two worst daily drops of the year for about the s. and p. five hundred and the dow in terms of both percentage points should folks look at what's happening in the stock market and extrapolate rob relate that to the broader economy from your perspective guessing right i always say and other people always say stock market economy and the economy is not stock market but the stock market is kind of a representation of how business feels so this is confident. The stock market is going up. Not competence stock market is going down and when the stock market starts to go down consistently considerably. It's a sign that things are very bad so you take it with a grain of salt but at the same time is a sign that there is has considerable worry about what's happening in the economy and what's happening particularly with the trade war so there is a segment of wall street right now. That's very very worried that sees what's happening and things oh man. It's time for us to to move out of stocks and we've got to really get into safe assets. We've seen this actually all year. Funds moving moving out of risky assets like stocks like oil commodities things like that moving into basically savings counties money market funds moving into bonds and that's what you're seeing all these negative yielding bonds around the world because people like. I don't care that this thing has no yield. I don't care that literally. I have to pay to be in these bonds. I would rather be here in something like stocks so that's been happening. It's been consistent theme all year. What's new right. Now is just the volatility people selling really strong really hard guard on individual days and that'll be interesting to watch because the other thing you also have a lot of people on wall street who are very confident that hey you know at the fundamentals are good look at u._s. Retail sales which had had a blowout number look at the unemployment rate. We can't be in a recession right now. So let's buying the dips anytime stock market goes down got it by so those two factors are are really battling each other right now the market thing let me ask you what no journalist ever wants to answer you buller barrett in a year from now when there's a presidential debate between democrat and donald trump trump are they going to be discussing the u._s. Recession as an agreed upon thing oh man. I have no comment on that dan <hes> you know i just report. The news is is what i like to say yeah. I don't really like to say i'm a bull or a bear. I just you know i see there's a lot of bad stuff right now. But the same time there is also good stuff so i can understand being a bull or a bear <hes> i think if you dig into the numbers there is enough it right now in the engine is economy to gaza problem but the car is still running the honorable and editor of axios market. You.

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