Is The West heading for a Recession in 2017 – 2018?

Dear PGM Blog readers,

In this weekend blog article, we want to elaborate on the reported Q1-2017 growth, of several leading world economies, which were reported in the second half of April this year.


On Friday, April 28, France reported that the country quarterly GDP growth slowed to 0.3 percent in three months to the end of March, from 0.5 percent in the fourth quarter of 2016.

Below chart shows the GDP Growth of France over the last 12 quarters.

In the first quarter, household consumption rose 0.1 percent, slowing sharply from a 0.6 percent rise in the previous quarter. Government expenditure gained 0.4 percent, compared to a 0.3 percent increase in the preceding quarter.

Total gross fixed capital formation grew by 0.9 percent, faster than a 0.6 percent growth in the December quarter.

Year-on-year, the GDP grew by 0.8 percent, slower than an upwardly revised


UK economic growth slowed at the start of 2017 to its weakest pace in a year, driven by a slowdown in the dominant services sector, according to official figures.

Quarterly GDP growth moderated to 0.3 per cent in the three months to the end of March from 0.7 percent.

As can be seen from below chart, It was the slowest rate of growth since the first quarter of 2016, as services output expanded at a slower pace, dragged by consumer-focused industries.

Year on year growth was 2.1 percent higher, up from 1.9 per cent, but again just shy of a forecast of 2.2 percent.


On Friday, April 28, The U.S.A. department of commerce, reported that the country’s economy grew at its weakest pace in three years in the first quarter as consumer spending barely increased and businesses invested less on inventories, in a potential setback to President Donald Trump’s promise to boost growth.

Gross domestic product increased at a 0.7 percent annual rate also as the government cut back on defense spending, the Commerce

As can be seen from below chart, the Q1-2017 GDP Growth report was the weakest performance since the first quarter of 2016.



The slowdown of the French economy in Q1-2017, was mainly due to sluggish private consumption and a slump in net external demand.

Exports shrank by 0.7 percent, following a 1.4 percent rise in the fourth quarter, while imports went up 1.5 percent, faster than a 0.8 percent increase in the preceding quarter. The foreign trade balance contributed negatively to the economy (-0.7 points after 0.2 points in the December quarter).

France is currently between votes in a presidential election where the economy has taken centre. The final round vote next weekend will be fought between pro-EU, market friendly centrist Emmanuel Macron and the Frexit-supporting far-right Marine Le Pen.

The unpredictable race had generated significant market uncertainty earlier this year, but prospects for the economy could brighten as polls show Mr Macron will emerge as a clear victor in the race for the Elyseé Palace after five years of a Socialist government.

A former French economy minister under outgoing president Francois Hollande, Mr Macron is promising to revive growth and employment by freeing up labour regulations and cutting the tax burden on the self-employed.

He has also vowed to push ahead with eurozone reforms and repair the Franco-German relationship in the EU.

United Kingdom:

With the UK growth having proven broadly resilient in the aftermath of the EU referendum last June, economists have warned that rising inflation should dampen the consumer spending that has powered the economy since last summer.

With Britain having kicked off its Brexit talks and inflation still on the climb, growth could fall back further in the middle of the year, although this, the Bank of England as well as the International Monetary Fund expect annual UK GDP to expand to 2 percent in 2017.


The Q1-2017, GDP report was the first economic report under president Trump and was released coincidentally on the 99th date of his new administration.

The deceleration in real GDP in the U.S.A. was mostly a result of weak consumption due to lower auto sales and home-heating bills which offset a pickup in investment in housing and oil drilling and rise in exports.

The Q1-2017, deceleration of the real GDP reflected also a deceleration in Personal Consumer Expenditure and downturns in private inventory investment and in state and local government spending that were partly offset by an upturn in exports and accelerations in both nonresidential and residential fixed investment.

Further analysis of the anemic 0.7 percent rate in Q1-2017, sharply below the 2.1 percent annual rate of the Q4-2016, shows that this figure is the worst since Q1-2014 as can be seen in below chart.

Most investors will be asking themselves if, the above mentioned slowing economic growth in world biggest economies in the West, might be the first signs of a coming recession in the West.

We believe that an investor must always play besides the offensive game also a defensive one, and that after 8 years of a bull market in the West, it might take a breather.

Until next time

Eric Panneflek

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