Europe Slowdown Worse than US: Goldman

Europe cannot decouple from the US, and current indicators point to a worse slowdown for the euro zone economies than for the United States, according to Jim O’Neill, Head of Global Economics at Goldman Sachs.

A 0.2 percent decline in second-quarter GDP for the euro zone has been “passed off by the ECB as the fallout from an unusually strong first quarter”, says O’Neill, but indicators such as poor investor sentiment from Germany’s IFO index, as well as weak orders data for Europe’s biggest exporter, point towards a weak third quarter, seen by the OECD as shrinking 0.4 percent.

However, emerging markets, while not completely decoupled from the woes of the West, are helping to mitigate against the slowdown with strong domestic growth, providing export support to the US and European economies, said O'Neill.

So to get an accurate reading of the state of the global economy, investors should focus on “new developments outside the U.S.”, as opposed to putting too much emphasis on data such as Friday’s U.S. jobs report, he added.