There has been a lot of negative economic news in recent weeks about some of America's largest trading partners. Japan's economy just registered its second consecutive quarter of negative GDP growth, which means that it is now officially in a recession.
The reports from the eurozone are also bleak — Germany's economy is struggling, and France and Italy are already in a recession. Even the Chinese economy is showing signs of weakness. Just when it seems that the U.S. economy is finally gaining traction and we can look forward to 2015 with increased confidence, we now have to worry whether the world's other major economies will spoil the fun next year.
Let me state right at the beginning that I do not believe the U.S. recovery is in any jeopardy.
It would be nice to have growing demand for our products in all of the world's markets, but it is not necessary. American companies engage in a lot of foreign trade, but the U.S. still has a relatively closed economy. This is because exports account for only about 15 percent of this nation's GDP. A substantial amount of these exports are sent to our closest neighbors, Canada and Mexico, and the economic outlook for both of these countries is favorable. So the vast majority of goods and services that are produced in the U.S. are consumed right here in North America, and the North American economy is poised for a year of solid growth in 2015.
The eurozone accounts for only about 20 percent of all U.S. exports. Trade with our European partners will most certainly be diminished if these economies stall or fall into a recession, but it will not disappear entirely. If you are a company that relies on the European markets for a significant portion of your business, then you should be prepared for tougher market conditions and lower demand in these countries. But the effect on the total U.S. economy will be a relatively small one.
The outlook for the Chinese economy is a bit trickier because the economic data that comes from China is less reliable. I am comfortable in reporting that the growth rate for the Chinese economy is slowing, but it is not clear what the rate of descent is. Such information would be particularly useful right now, but as usual, we can only make estimates based on the information that the Chinese government provides.
One trend that is clearly evident however is the Chinese government's desire to prevent economic growth from slipping further than it already has. They will continue to invest in infrastructure projects, housing, technology and lending to small businesses. The result of all of this is that the Chinese economy may decelerate in 2015, but it will probably continue to expand at a solid rate for the foreseeable future.
With the large economies of both the U.S. and China providing the power, the growth in the overall global economy is actually expected to accelerate modestly in 2015 when compared with this year. The latest estimate for total global economic growth in 2014 is in the range of 2.5 percent, and the forecast for 2015 is a bump up to 3 percent. Faster growth in the U.S. will result in demand for more imported goods and this will be a tailwind for all of our major trading partners.
For those of you who plan to conduct a significant amount of business in other countries, the current outlook is that overseas market demand for plastics products and machinery will vary widely by region. By far, the strongest market conditions will be in North America in 2015. If you look further south than Mexico, then conditions will not be so good. Industrial production levels in Brazil, Argentina and Venezuela are in a firmly established downtrend, and most of the Latin American countries are counting on a surge in exports to North America to get their economies rolling again. This will likely happen, and the trade flows will be more favorable for their economies than for ours. In other words, imports from Latin America will grow faster than exports to Latin America in 2015.