IMF Sees U.S. Fading as Global Growth Engine
The world is leaning less on its biggest economy to sustain the global recovery, according to the International Monetary Fund. The fund left its forecast for global growth unchanged in the latest quarterly update to its World Economic Outlook, released Monday in Kuala Lumpur. The world economy will expand 3.5 percent this year, up from 3.2 percent in 2016, and by 3.6 percent next year, the IMF said. The forecasts for this year and next are unchanged from the fund’s projections in April. Beneath the headline figures, though, the drivers of the recovery are shifting, with the world relying less than expected on the U.S. and U.K. and more on China, Japan, the euro zone and Canada, according to the Washington-based IMF. The dollar fell to its lowest in 14 months last week as investors discounted the ability of President Donald Trump’s administration to deliver on its economic agenda after efforts by the Republican Senate to overhaul health care collapsed. The IMF estimated U.S. growth at 2.1 percent this year and again in 2018, consistent with what the fund said June 27 in its annual assessment of the U.S. economy. In the April world economic outlook, it had forecast U.S. growth of 2.3 percent and 2.5 percent, respectively, in 2017 and 2018. The economy expanded by 1.6 percent in 2016.
Euro zone business growth slows at start of second half
A slowdown in euro zone business growth at the start of the second half of 2017, alongside declining inflation pressures in a key business survey, could put paid to expectations of a stimulus clawback by the European Central Bank later this year. Years of ultra-easy policy have bolstered still-solid growth, but inflation is nowhere near the European Central Bank’s 2 percent target ceiling and even shallower price rises this month will provide disappointing reading for policymakers. Germany and France, the two largest economies in the club, missed expectations, suggesting an even more robust pace of business activity in many of the bloc’s other members. IHS Markit’s Euro Zone Flash Composite Purchasing Managers’ Index for July, seen as a good guide to economic growth, fell to 55.8 from June’s 56.3, still comfortably above the 50 level that separates growth from contraction. That was below median expectation in a Reuters poll for a modest dip to 56.2.
China insurance regulator urges industry to show more ‘self-discipline’
China’s insurance regulator has urged the industry to show greater “self-discipline” and “serve the real economy”, in a nod to the central government’s focus on fighting financial risk. In a speech published on the China Insurance Regulatory Commission’s (CIRC) website on Saturday, vice-chairman Liang Tao said the insurance industry should “return to its origins” and work to “reduce tremors” in the economy and society. The comments follow a turbulent few months in the insurance sector and a call last week from President Xi Jinping for the banking, insurance and securities regulators to show more accountability. In recent years, some insurers have taken sizable stakes in listed companies, often funded by issuing high-yield, short-term universal life insurance and other investment products. The top CIRC job has been vacant since April, when former chairman Xiang Junbo was put under investigation for suspected “serious disciplinary violations,” a phrase that usually refers to graft.
IMF maintains global growth forecasts; China, Eurozone revised higher
The International Monetary Fund kept its growth forecasts for the world economy unchanged for this year and next, although it revised up growth expectations for the Eurozone and China. In an updated World Economic Outlook published on Monday, the IMF said global gross domestic product would grow 3.5 percent in 2017 and 3.6 percent in 2018, unchanged from estimates issued in April. “While risks around the global growth forecast appear broadly balanced in the near term, they remain skewed to the downside over the medium term,” the IMF said in updated forecasts released in the Malaysian capital, Kuala Lumpur. The IMF shaved its forecasts for U.S. growth to 2.1 percent for 2017 and 2018, slightly down from projections of 2.3 percent and 2.5 percent, respectively, just three months ago. The Fund reversed previous assumptions that the Trump administration’s planned stimulus measures would boost U.S. growth, largely because no details of those plans have been made public.