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Slow-down finally here

THE slow-down in the US economy that had been expected for quite some time appears to be finally here.

The latest GDP growth figures released to the US market indicates that the GDP growth rate there has slowed from over 5% to just over 2%.

This could well be the soft landing the markets have been hoping for.

The main outcome would be the direction of interest rates in the US.

The view that Dr Greenspan would need to raise rates has now been replaced by a view that there is a real possibility rates could actually be lowered there in the next move early in the New Year.

At the same time as this occurred, the Japanese Central bank made a decision not to raise interest rates there.

This suggested that the bank was certainly taking the view that the world economy was slowing and would therefore impact negatively on the Japanese economy.

There was therefore no reason for them to be raising their rates just at this point.

What does this all mean for us here in Australia?

The slowdown in the world economy will have a major impact on the sales of our commodities overseas.

This could have quite an impact on our trade figures, which as we have seen recently are somewhat dependent on the trade in commodities.

The OECD report from a week or so ago did flag this scenario as a possibility and as a consequence did suggest that there was likely to be a decline in the rate of GDP growth in Australia.

This looks like becoming a more definite prospect now.

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