The Long : Prospects Good
- The OECD projects that the US will grow by 3.1 percent in 2015 and by 3 percent in 2016,
- UK is projected to grow at 2.6 percent in 2015 and 2.5 per cent in 2016.
- Canadian growth is projected at 2.2 percent this year and 2.1 percent in 2016.
- Japan is projected to grow by 1 percent in 2015 and 1.4 percent in 2016.
- The euro area is projected to grow at a 1.4 percent rate in 2015 and a 2 percent pace in 2016.
- major euro area economies.
- Germany is forecast to grow by 1.7 percent in 2015 and 2.2 percent in 2016, France by 1.1 percent in 2015 and 1.7 percent in 2016, while Italy will see a 0.6 percent growth rate in 2015 and 1.3 percent in 2016.
- China is expected to grow by about 7 percent annually in both 2015 and 2016.
- India will grow by 7.7 percent in 2015 and 8 percent in 2016.
- Brazil’s economy is expected to shrink by 0.5 percent in 2015 before returning to a 1.2 percent growth rate in 2016.
The United States, the major driving force of global growth, has a decelerated real GDP growth rate for
the January-March quarter. This was in part, due, to effects
of adverse weather conditions. The Texan floods add to economic impacting of nature further. Inflation is being held in check by the slow recovery and, also by lower prices of imported goods as also the fall in oil prices. Unless there are clear indicators of a reversal, the Fed will not hike rates any time soon.
Structural fragilities in Europe seem to persist. Europe may get its act together on the Greek tragedy, but its dithering and dallying policy makers are not so inspiring. A temporary truce is not likely to help and structural reforms seem so far away. France and Italy are still laggards to Germany. European banks seem to be too big to fail but seem arthritic in reactions with the agony of misfeasance.
Global growth will have to be primarily led mainly
by Asian private demand, with firm households spending. The Chinese economy remains sluggish against the backdrop of the deceleration in fixed asset investment and continued inventory adjustments. India is still slow on its reforms and its Prime Minister appears to be a lone ranger for infrastructural growth. Dreams to reality is India's challenge. Its central bank might reduce the interest rate this week but this might have already been factored in last week by investors. Further, the transmission mechanism is slow and halting. Its bureaucracy is sluggish and archaic so FDI will be slow and in fits. China is ahead of India by at least a decade, (although "Comparisons are odious palabra' said Shakespeare). The fact remains that the Indian Government is aware that it has to accelerate growth through infrastructure trigger.
Commodity exporting economies like Australia are yet to gain momentum.Mining firms are likely to cut investment against the backdrop of sluggish demand. Australia has become so China linked that it is waiting for the Asian giant to lead. The Australian unemployment rate is forecast to rise further and wage growth is unlikely to move up, thus affecting purchasing power or saving potential. The official stance seems to be to talk the Aussie dollar down.
Crude oil prices might rise a shade on political tensions in the
Middle East and uncertainty in US (read Texas ) supplies but is likely to be pulled back
because of the 30 million barrels of oil per day supplies yet to meet equivalent demand. The weaker economies among the oil suppliers open up their taps on the sly to meet internal income demands; so the price
of WTI might languish at around $60 per barrel.
There is little to revive gold - neither inflation nor Asia seems poised to extend a hand. India's ambitious gold deposit scheme might, if it takes off, add in volumes to the supply and might off set any rise in the global gold demand. India's many temples, if not households, could monetize gold. So supply side economics will keep gold prices down for quite some time.
Europe has been the epi-center of the global bond-market quake since mid-April. About $375 billion was wiped off the value
of euro-zone-government bonds when prices fell abruptly after rising for several
months to record levels. So investors might be hesitant to return to bonds so soon.There are monetary policy excesses at play. Players like the Swedish central bank (Riksbank) face a risk of bond shortages as they intend to enhance market liquidity. Substituting sovereign with mortgage bonds might just about fuel a bubble in the housing market.
So the short of it is that equity markets might host investors this week despite possible volatility. Japan looks to be the week's favourite economy with some dissipation of the deflation sentiment in view. The tremors off its coast may not have had much of an economic effect.
Without any risk or responsibility on the part of the author.
“We’re in the dark like everybody else on this. We don’t have any information at all, a lot of curiosity.” (Richard Hart, Police Chief , Yorkville)
No comments:
Post a Comment