Emerging slowdown

October 8, 2013

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The IMF’s latest projections on the fate of the world economy are out: if you’re interested in 249 pages of “Transitions and Tensions,” which is this year’s theme, read the full report. The shorter version is that the world economy, the IMF writes, is in “low-gear”. The US is engaging in “excessive fiscal consolidation” (read: the sequester and shutdown); Japan’s economy is growing, but fiscal policy should tighten next year; and the Euro area is “tepid.” The Economist breaks the report down in interactive chart form. As Reuters notes, this is the sixth straight time in less than two years that the IMF has cut its global growth forecasts.

Neil Irwin sums up the report in four words: “Not good at all.” The IMF’s global growth projection for 2013 was revised down to 2.9% from 3.2% in July. US growth was also revised down to 2.6% from 2.7%, and Euro growth was revised up the same amount to 1%. Things look even worse in emerging markets: India’s growth projections were slashed by 1.8%, Mexico’s was cut 1.7%, and Russia’s was down 1%. Yesterday, the World Bank also cut its growth forecast for China and East Asia.

Martin Wolf has a good overview on the problems the world’s major economic blocs face: in high-income countries like the US, UK, and Japan, he writes, the big drag on growth is government spending cuts. Emerging economies, he adds, have to deal with a new world of higher interest rates, lower commodity prices, and a “structural slowdown” that’s happening “not least in China and India.” Earlier this week, Gavyn Davies suggested that stagnation in global trade may be partially to blame for the world’s economic slowdown.

Jeremy Warner points to a striking IMF chart which shows that it’s good to be on the outside of eurozone looking in: “virtually the entire eurozone is either in outright recession or showing growth of less than 1%.” The UK, for example, actually had its 2013 growth forecast raised to 1.4% from 0.9%.

The distinct lack of growth in the global economy isn’t likely to be the center of attention at the IMF’s meeting in Washington this weekend. Instead, the WSJ reports, America’s protracted, nauseating political gridlock will be the main focus. — Ryan McCarthy

On to today’s links:

Fascinating
How Aflaaaaac became Japan’s #1 cancer insurance provider – Matt Phillips

Hope/Change/Etc.
Why the Obamacare website failed: blame contractors - NYT

Twitter
Adjusted EBITDA and Twitter’s questionable accounting – Stephen Gandel

Ugh
Americans’ confidence in the economy shows biggest drop since Lehman collapsed in 2008 – Gallup

Facebook
No, Facebook’s IPO wasn’t a disaster – Dan Primack

Politicking
The game theory behind the debt ceiling crisis – HBR

Millennials
“Default risk is highest among credit card holders in their 50s, not their 20s” – Bloomberg

Yikes
Commercial satellite companies are producing too much space junk – Quartz
Things you don’t want to happen during a shutdown: a multi-state salmonella outbreak – USDA

Good News
Greece *might* emerge from its six-year recession next year – Reuters

Ugh
13 reasons why Washington is failing – Ezra Klein

Wonks
Government shutdowns aren’t “small government”, they’re full-on financial shocks – Scott Sumner

Right On
Meanwhile, things are awesome in Australia – Bloomberg

Apple
The Godfather of Apple design on four big tech trends – Wired

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