The OECD says that global growth may have peaked and says the outlook is less good now than it predicted in May:
[This article makes an important point but the suggestion that global growth will settle at a robust-sounding 3.7% next year flatters to deceive. In simple terms all growth is now predicated on, and enabled by, an historically unprecedented debt-bubble. GDP stats ignore this reality. Furthermore if we measure global GDP in US $ – and at the bottom of this thread I include an article by Gail Tverberg, explaining why this more accurately reflects economic reality – we can see that growth has not just peaked but stalled out entirely.]
“The west’s leading economic thinktank has warned that the expansion in the global economy may have peaked after cutting its growth forecasts for an array of rich and developing countries.
“In its latest update on the health of the world economy, the Organisation for Economic Cooperation and Development said the outlook for both 2018 and 2019 was less good than it had predicted in May.
“The Paris-based OECD called for immediate action to halt the “slide towards protectionism”, noting that trade tensions were already having an impact on confidence and investment.
“Britain has had its growth forecast shaved by 0.1 points in both years to 1.3% and 1.2%, respectively – with the OECD saying the squeeze on living standards was affecting consumer spending and uncertainty about Brexit leading to soft investment…
““The recent increase in risk spreads on Italian government bonds, and the associated decline in the equity prices of Italian banks, provide a demonstration of the pace at which continued vulnerabilities in the euro area can re-emerge,” the OECD said…
““Confidence has also eased and investment and trade growth have proved softer than anticipated. Business survey data point to slower growth in both advanced and emerging-market economies, and incoming new orders have eased, especially manufacturing export orders,” the interim economic outlook said.
“Recent problems in Argentina and Turkey have led to big cuts in the OECD’s growth forecasts…
“It warned… that the recovery since the recession of 10 years ago had been slow and only possible with an exceptional degree of stimulus from central banks. “A decade after the financial crisis, vulnerabilities remain in financial markets from elevated asset prices and high debt levels. Reforms have strengthened the banking system, but risks have shifted towards less tightly regulated non-bank institutions.””
“U.S. investors are keeping stock prices high as though the troubles in emerging markets were a world away. “But if you think financial contagion is ancient history, listen to Carmen Reinhart.”
“Turkey’s finance minister has lowered the country’s economic growth targets and promised to slash public spending by nearly $10 billion (€8.5 billion) as the country seeks to find a path out of a currency crisis…
“The Turkish lira has lost 40 per cent of its value against the dollar since the start of the year as investors have become increasingly fretful about the country’s economic health.”
“Egypt’s predicament is a reminder that although regional economic integration in the Middle East has never been particularly strong, which prevents some kinds of contagion, such as currency crises, the national economies of the region are connected in other ways.
“Poorer states are dependent on wealthier ones for oil and gas subsidies, direct financial support, and for the employment of millions.”
“Tunisia’s powerful UGTT union called a nationwide public sector strike for Oct. 24 to protest against what it called government plans to sell public companies, the latest tension with the government, which is under intense pressure. The country has struggled to fulfill donors’ demands to reform its economy and cut its budget deficit amid turmoil since the ousting of president Zine El-Abidine Ben Ali in 2011… the North African country is struggling with economic crisis and a ballooning budget deficit.”
“Although the US sanctions on Sudan were lifted in October 2017, creating much expectation in the general population that the economy would improve, the situation in the country has continued to deteriorate.
“According to the government, the inflation rate reached 64 percent, while experts say that in reality it could be as high as 100 percent.”
“The Namibia Statistics Agency (NSA) yesterday announced that quarter-on-quarter, the economy maintained the same pace of declining growth of 0.2%. This also means the contraction is worse than the -0,1% seen in the first quarter of 2018.
“The country has been in a recession since the second quarter of 2016.”
“The South African Reserve Bank held its key interest rate at a two-year low as the economy struggles through a recession and policy makers warned that investor sentiment toward emerging markets is a risk to the currency and adds to inflation pressures.
“The Monetary Policy Committee voted to hold the repurchase rate at 6.5 percent Thursday.”
“Inflation, now at a nine-year high of 6.4 percent and running above the central bank’s 2-4 percent target for the past six months, is eroding the purchasing power of Filipino consumers, the backbone of the Southeast Asian economy. The weaker peso, which fell to a 13-year low last week, is one major factor driving it. But even the families of the estimated 10 million overseas Filipinos who earn foreign currency are feeling the pinch as higher oil prices and heavy government spending are also pushing prices higher.”
“China’s growing economy has, over the years, disobeyed a range of economic laws. One of them is the Stein’s Law, according to which, something which cannot go on forever, will, eventually, come to a stop. China’s debt accumulation, however, does not seem to be slowing down… With the overwhelming nature of the threats the Chinese economy is facing, it seems rather sooner than later that the laws of economics will catch up, for the eventuality of which, China, and the whole world, should brace itself.”
“Donald Trump’s trade war is already harming global economic confidence and investment, and could soon hit jobs and living standards, top economists have warned.
“Goods directly affected by tariffs, such as Chinese washing machines sold in the US and American cars bought in China, have already been hit hard with prices jumping and sales tumbling.”
“The auto industry fears that President Donald Trump’s threat to place tariffs on vehicles coming into the U.S. could drive the economy into a recession, the head of the largest auto retailer in America said on Wednesday. “Everyone… in the automobile industry is freaking out around tariffs on automobiles,” Mike Jackson, chairman and chief executive officer of AutoNation Inc. said Wednesday.”
“It was left to Donald Tusk, president of the EU council, to deliver the coup de grace. The Chequers’ deal was unworkable because it undermined the integrity of the single market.
“And, by the way, its solution to the Northern Ireland border was just fantasy.”
“The 10-year anniversary of the Lehman Brothers bankruptcy has been met with a lot of reflection about how things have changed since the dark days of 2008. Craigs Investment Partners head of private wealth research Mark Lister said… the elephant in the room was the fact debt levels across the world were higher than they were in 2008.”
“Sheila Bair, former chair of the Federal Deposit Insurance Corporation, on Thursday warned that the economic recovery since the 2008 financial crisis has been largely driven by ballooning consumer and corporate debt, fueled by low interest rates.”
“Kolanovic doesn’t see potential problems until the second half of 2019 [but] a trade war with China, the speed of interest rate hikes and the unwinding of bond purchases by the Federal Reserve are factors that could change that timeline.
“Kolanovic notes that if markets fall by 40% or more, for example, the Federal Reserve may need to take drastic action to prevent a depression. This would mean the Federal Reserve could purchase equities or attempt to stimulate the economy through additional tax cuts.”
“World GDP in current US dollars is in some sense the simplest world GDP calculation that a person might make. It is calculated by taking the GDP for each year for each country in the local currency (for example, yen) and converting these GDP amounts to US dollars using the then-current relativity between the local currency and the US dollar.”