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Worries about China have markets on alert

Jeremy Hobson Mar 23, 2012

Jeremy Hobson: Well now to one of the reasons we keep playing the sad music when we do the stock market numbers: China, and what looks like the beginning of its economic slowdown.

Chris Low is chief economist from FTN Financial and he’s with us live from New York as he is every Friday. Good morning, Chris.

Chris Low: Good morning.

Hobson: Tell us why this news from China is having such an effect in the markets, we got some news this week about a manufacturing slowdown.

Low: That’s right and the reason it’s having an effect is that it’s a surprise. We saw the Chinese data slow significantly in the fourth quarter then things looked a little better in January. It was actually back up into positive growth kind of territory so it’s a surprise, I think, to the markets to see it back down again.

Hobson: And how much does this concern you when it comes to the effect this could have on the U.S. economy?

Low: Well, there’s two things I think you need to think about. One, the sad music when you talk about the stock market. 50 percent of S&P earnings roughly comes from overseas. China is a terrific barometer of global growth, when China’s slow, global growth is slow. As far as the U.S. economy goes though, you know China’s the other big consumer of commodities and I would expect with slower growth in China, that should mean lower prices of commodities which is a positive for the U.S. economy.

Hobson: A positive for the U.S. economy perhaps from a slowdown in China.

Low: That’s exactly right. Every time growth here has gotten over 3 percent since the Great Recession, we’ve run into rising gas prices which has floated back down again. This time, if we can get some momentum going back home, I think we can hang onto it for a while.

Hobson: Chris Low, chief economist with FTN Financial. Thanks so much.

Low: You’re welcome, thank you.

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