Willem Buiter, Citi’s global chief economist, believes global growth will come in at somewhere between “moderate and modest” in 2015, with his team shaving their growth target from 3 per cent last month (and 3.3 per cent six months ago) to 2.9 per cent.
As Buiter noted in a meeting in London on Friday, it’s also unlikely that in the long run currency wars, which wash each other out, will help to drive demand: Read more
Let’s peer into the nearish future for the world economy.
The International Monetary Fund has slashed its global growth forecast for this year and exhorted the European Central Bank to boost liquidity to stave off a deeper eurozone crisis, The Telegraph says, citing a leaked draft of the IMF’s economic outlook, to be published next week. Global GDP growth is to be cut from 4 per cent to 3.3 per cent, with Italy’s economy forecast to contract by 2.2 per cent and Spain’s by 1.7 per cent, the newspaper says. The eurozone as a whole is expected to shrink by 0.5 per cent, down from growth of 1.1 per cent in the IMF’s last forecast made in September. UK growth was forecast at 0.6 per cent while China’s was revised downwards from 9 per cent to 8.2 per cent. The report also encourages the ECB to adopt a “more accommodative monetary policy”.
Job creation across the world is set to slow sharply in the last three months of the year, as companies plan to scale back their hiring plans in response to the stuttering global economy, according to a leading survey of employers, the FT reports. The Employment Outlook survey, due to be released on Tuesday by ManpowerGroup, the global recruiting company, will be unwelcome news for policymakers, who are struggling to bring down stubbornly high unemployment rates. The survey indicates that employers intend to cut the rate of hiring from the third quarter or keep it stable in 32 of the 39 countries for which there are comparable data. Employers in India and Turkey plan to reduce the pace of job-creation the most, but hiring is also expected to slow in a slew of the world’s biggest economies, including the US, the UK, France, Italy, China, Canada, Mexico and Australia.
Group of Seven financial leaders, worried about risks to global growth, are likely to agree this week to keep monetary policy accommodative, slow fiscal consolidation in countries where that is possible and implement structural reforms, Reuters reports, citing an unnamed source. Finance ministers and central bank governors of the United States, Canada, Japan, Germany, France, Italy and Britain (G7) meet on Friday in the French port of Marseilles to discuss what action to take to prop up the slowing global economy. “The main issue will be the slowdown in the global economy and what is the best way to tackle that,” a G7 official with knowledge of the preparations for the meeting said.
Risk assets have not had a great month so far, with global equities now having eliminated most or all of the gains they recorded during January and February.
It is tempting to view recent setbacks as a natural response to the heightened uncertainty which has been caused by an extraordinary combination of exogenous shocks hitting the system. But these shocks will ultimately cause a bear market only if they are sufficient to cause a major slowdown in global economic activity. Read more
In a whopping report out Monday, Citi’s Willem Buiter and Ebrahim Rahbari call time on ‘Emerging Markets’ and ‘BRIC’ labels.
And not a moment too soon, we reckon. Read more
Seasonal cheer continued to drive risky assets in European and Asian markets on Tuesday, but the shine may be wearing off, the FT says. Commodities were modestly firmer and markets in Asia up below 1 per cent as traders tentatively added to bullish positions on hopes for better global growth in 2011. Monday’s flat finish in the S&P 500 has however caused some to argue that a 5.1 per cent gain in just over a week will not carry through to similar advances before December 24.
To keep a running tab on how things are going we have a couple of friendly widgets:
The Heat Map Read more
The September stock surge entered its fourth consecutive session in Asian and European markets on Monday, with mostly improving economic data over the past few days encouraging a shift into plays on global growth, says the FT. Even though US markets are taking a break for Labor Day, the S&P 500 has already rallied 5.3 per cent so far in September, versus a 4.8 per cent fall in August. Investors are playing catch-up with Friday’s jobs report, according to Reuters — but the IMF’s chief economist is still warning of weak growth in the US and Europe.
It’s bullishness, but not as we know it.
Here’s the Nomura take on investing in a world beset by a slowing US recovery: Read more
The International Monetary Fund has warned that the risk of a slowdown in the global economic recovery has risen sharply, but that governments should continue planning to tighten fiscal policy, the FT reports. Updates to the IMF’s regular world economic outlook and assessment of global financial conditions, released on Thursday, said jitters in financial markets in May and June threatened confidence and growth worldwide.