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Blue Point Trading Market View – October 18, 2012

Blue Point Trading Market View – October 18, 2012The birth rate – more headwinds for the US economy. New numbers released by the U.S. government on Tuesday show record-low birth rates in 2011: the general fertility rate (63.2 per 1,000 women ages 15 to 44) was the lowest ever recorded; the birth rate for teenagers ages 15 to 19 declined; birth rates for women ages 20 to 24 hit a record low; and rates for Hispanic and non-Hispanic black women dipped. Some birth rates remained unchanged, like those of women in their late 40s. Only women ages 35 to 39 and 40 to 44 are more likely to have babies now than in the past.

The data are part of a broader post–financial crash trend. Every year since 2007, when the number of births in the U.S. hit 4.3 million (as seen in the thumbnail chart), Americans have brought fewer babies into the world. Much of that has to do with the recession: Americans apparently decided that they couldn’t afford to have as many kids in an unstable economy, even if they were married. Looking carefully at the chart, its not only the number of births that have declined, but as well, the rate of births – hence this number can accelerate down.

Europe’s birth rates have been declining for decades, especially in its most economically stable country. Germany’s rate — 1.36 children per woman — is the lowest in all of Europe and one of the lowest in the world. There were fewer German births in 2011 than at any other time recorded. The U.S. rate hasn’t fallen to European levels yet. The birth rate of children per woman in the U.S. is about 1.9. But the downward trend will almost certainly force the U.S. to rethink how to financially support the elderly and fund programs like Social Security and Medicare, ongoing economic debates that will take on even more weight as the country ages.

This lowering birth rate phenomenon is common in all industrialised countries. As people get more affluent, they want to enjoy their affluence and have less babies. Then developing countries have a higher birth rate to replace the dominate countries. Its natures way to keep a balance between have and have not nations, as demographics in the end rule the world. This is why industrialised countries inevitably will need to make way for the developing nations – which will drive economics and global foreign policy debates.

For the markets this means that this birth rate will serve as yet another damping effect on the markets over the coming years. Some have sighted that this dampening can have a negative affect of as much as a -0.5% of a countries GDP. Immigration could be one policy that could change this, but these same affluent counties tend to shun this solution as it threatens their own personal placement in the social-economic ladder. Today in the US, it is one of the more positive ways to keep the population growth up (assuming this is the desired goal). This is not a day to day trading statistics to watch, but certainly something to keep in mind, when viewing the long term prospects for growth in industrial economies.

Daily Market View: (click here)

 

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