Like the polls that separate the swing states from the rest of the country, the reports on the economy appear to be at a major disconnect. Home sales are up, and the Thomson Reuters/University of Michigan's preliminary October survey of consumer sentiment climbed to 82.6, the highest since September 2007. On the other hand the corporate view is the exact opposite -- investments are down, the outlook for future economic growth is negative, and CEO confidence is at its lowest level since 2009.
But unlike the election polls the differences here are explainable. To paraphrase James Carville, it is the globalized interconnectedness of the world economy, stupid. The EU's economy of $16 trillion is the largest in the world. And in the age of globalization, when Europe gets the flu it is impossible for American corporations not to catch a cold.
Europe is America's main export customer, and home for much of America's FDI. Whether you are talking about GE or Ford, American Corps are being hurt by Europe. As an example, Ford is being forced to close three plants in Europe, cutting 5,700 jobs while here in North American, for the moment Ford's sales are still healthy.
The euro crisis is now turning into a full-fledged European recession and it is causing a direct hit on American companies. Compounding this is the fact that China is Europe's largest export partner so that if the European economy dramatically weakens, America's export sales to both markets decline and as a result.
All of this can be seen in yesterday's figures from the Netherland's Bureau for Economic Trade Analysis (CPB) which monthly reports on World trade. The volume of world trade fell for the third straight month in August. Exports from the U.S., Japan and Latin America declined, and world trade volumes fell 0.4 percent, as they did in July, after declining 1.3 percent in June.
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