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Sharp Fall in German Manufacturing is Another Sign of Global Economic Slowdown

German Manufacturing output in July was the worst in seven years, as measured by the German Purchasing Manager Index (PMI), a survey of prevailing economic marketing trends that is a major planning tool for corporate decision makers. It fell to 43.1 in July  from 45 in June (see chart). The sharp drop in Germany, the biggest manufacturer in Europe,  is another sign that the global economy is headed for a recession as economies around the world report similar slowdowns. In fact, the IMF says some 70% of the global economy as measured by GDP will experience a slowdown this year. That would make it the biggest slowdown since 2011.

That bad news also coincides with a report we highlighted in a Chart of the Week last month that there was a record amount of negative-yielding debt globally, some $12.5 trillion. We pointed out that a  rush into negative yielding, but very safe debt, usually occurs right before or during bad economic times. That’s because investor are seeking safety over appreciation.

Sharp Fall in German Manufacturing is Another Sign of Global Economic Slowdown
Sharp Fall in German Manufacturing is Another Sign of Global Economic Slowdown

Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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