NEWS,16.07.2012

IMF: Global growth forecasts cut

 

The International Monetary Fund (IMF) stepped up its warnings on Monday on risks to the global economy, especially coming from Europe, as it trimmed its growth forecast for the rest of the year.The IMF said the world economy appeared weaker since its assessment just three months ago, and while growth was only slightly off the expected pace, "downside risks continue to loom large," especially from inadequate or slow policy reactions in major economies."In the past three months, the global recovery, which was not strong to start with, has shown signs of further weakness," the fund said in its quarterly revision of economic forecasts."Financial market and sovereign stress in the euro-area periphery have ratcheted up," it said, while growth has fallen below expectations in a number of major emerging-market economies.It pointed to renewed deterioration in the markets for European sovereign debt as a sign that eurozone leaders need to move fast on pledged reforms.The IMF also singled out the overhanging risk from US political stasis that could send the country over a "fiscal cliff" due to laws that, if not changed, will force massive government spending cuts coupled with automatic tax hikes on January 1 that would severely crunch the world's largest economy."Avoiding the fiscal cliff, promptly raising the debt ceiling, and developing a medium-term fiscal plan are of the essence," the global crisis lender said in recommendations for the United States.After forecasting in April that the global economy would expand by 3.5% this year, the IMF said it had cut 0.1% off the forecast, but that the number remained at 3.5% because of rounding.For 2013, the forecast is 3.9%, down from 4.1%.The change in the worldwide outlook mainly came from sharp cuts to growth forecasts for the large emerging economies like China, India, Brazil and newly industrialized Asia.But in addition the IMF saw slower-than-expected growth in the United States, Britain and France, among the major industrialized nations. The US forecast dropped 0.1% to 2% ; France was down 0.1% to 0.3%; and Britain was projected to grow at just 0.2%, compared with 0.8% forecast three months ago.The bank also said Spain's recession would persist through 2013, after having forecast in April that the country's economy would return to growth next year.On the bright side, forecasts for this year for Germany and Japan were revised higher -- to 1% and 2.4%, respectively, though the 2013 prediction for each was also trimmed slightly.Also getting an upgrade was the Middle East and North Africa region, much of which has been struggling through deep political turmoil in the past two years. The IMF said the region would grow about 5.5% this year, much better than the 4.2% predicted in April. The IMF said that major economies were making progress on cutting their fiscal deficit burdens, but that doing so remained hampered by more volatility and risk aversion in debt markets, which have sent the borrowing costs of the troubled eurozone periphery countries skyrocketing.The global lender reiterated its prescriptions of recent months: short-term fiscal balance targets for troubled economies like Spain and Italy can be de-emphasized to allow for growth while more focus is placed on medium-term adjustments and reforms."A steady pace of adjustment focused on the measures to be implemented rather than on headline deficit targets is preferable, especially in light of heightened downside risks to the outlook."Moreover, the IMF suggested, the political stress of too much austerity, set to meet fiscal targets, could backfire in countries with IMF or IMF-linked bailout programs, like Ireland, Portugal and Spain."The recent deterioration in the political and economic climate in Greece serves as a warning about the potential onset of 'adjustment fatigue,' which remains a threat to continued program implementation."

U.S. Stocks Retreat as IMF, Retail Data Spur Concern on Economy

 

U.S. stocks fell, following the best one-day gain in two weeks for the Standard & Poor’s 500 Index, as the International Monetary Fund cut its global economic forecast and retail sales unexpectedly dropped.General Electric Co. lost 1.3 percent after Morgan Stanley reduced its recommendation on the stock. Alpha Natural Resources Inc. declined 12 percent as Bank of Montreal cut its rating on the coal producer, citing potential financing issues. Visa Inc. and MasterCard Inc., the world’s biggest payment networks, rose at least 1.8 percent after agreeing to a settlement of at least $6.05 billion in a price-fixing case.The S&P 500 declined 0.3 percent to 1,353.2 at 1:43 p.m. in New York, trimming a drop of as much as 0.6 percent. The Dow Jones Industrial Average slipped 49.76 points, or 0.4 percent, to 12,727.33 today.“The retail sales gives you another indicator that uncertainty has showed up in the consumer side,” James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. “We’re in a bit of the summer doldrums.”The S&P 500 is down almost 5 percent from a four-year high in April as economic data trails forecasts and investors brace for what is projected to be the first decrease in quarterly earnings since 2009. The Citigroup Economic Surprise Index for the U.S., which measures how much data from the past three months is beating or missing the median estimates in Bloomberg surveys, is at minus 64, near the almost 11-month low of minus 64.9 reached last week.Retail SalesU.S. retail sales dropped 0.5 percent in June, following a 0.2 percent decrease in May, Commerce Department figures showed today. The decline was worse than the most-pessimistic forecast in a Bloomberg News survey in which the median projection called for 0.2 percent rise.The IMF cut its 2013 global growth forecast as Europe’s debt crisis prolongs Spain’s recession and slows expansions in emerging markets. Growth worldwide will be 3.9 percent next year, less than the 4.1 percent estimate in April, the fund predicted in an update of its World Economic Outlook.Manufacturing in the New York region expanded in July at a faster pace than anticipated, signaling factories will keep contributing to growth. The Federal Reserve Bank of New York’s general economic index rose to 7.4 from 2.3 in June. The median forecast of 51 economists surveyed by Bloomberg News called for an increase to 4.0. Readings greater than zero signal expansion in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.Earnings SeasonEarnings beat estimates at 21 of the 32 companies in the S&P 500 that have reported quarterly results so far, data compiled by Bloomberg show. Profits probably decreased 2.1 percent in the second quarter, the first drop in almost three years, according to a Bloomberg survey of analysts.GE, the world’s biggest maker of jet engines, power generation equipment and locomotives, declined 1.3 percent to $19.52. The Fairfield, Connecticut-based company was cut to equalweight from overweight by Morgan Stanley, citing the stock’s higher valuation relative to peers with or without GE Capital Corp.Caterpillar Inc., the world’s largest maker of construction equipment, declined 1 percent to $81.28, while Boeing Co. fell 0.8 percent to $72.96 as industrial stocks led declines out of 10 groups in the S&P 500. Energy stocks were added 0.3 percent after earlier falling as much as 0.8 percent as the price of crude oil reversed a 0.8 percent decline to rise 0.5 percent to $87.57 a barrel.Coal StocksAlpha Natural Resources Inc. declined 12 percent to $6.74 as Bank of Montreal cut its rating to underperform from outperform, citing potential financing issues. Arch Coal Inc., the fourth-largest U.S. producer of the fuel, sank 3.9 percent to $5.90 after BMO cut the stock to underperform from market perform.MasterCard advanced 1.9 percent to $437.79 and Visa rose 1.8 percent to $126.32 after they agreed to settle a price- fixing case brought by retailers over credit-card swipe fees.Citigroup Inc., the third-biggest U.S. bank, advanced 0.7 percent to $26.83 after reporting second-quarter profit that beat analysts’ estimates on revenue from advising on mergers and underwriting stocks and bonds.Net income declined to $2.95 billion, or 95 cents a share, from $3.34 billion, or $1.09, a year earlier. Excluding accounting adjustments and a loss from the sale of a stake in a Turkish bank, earnings were $1 a share, compared with the average estimate of 89 cents in a Bloomberg survey of 18 analysts.Gannett Co., the owner of 82 daily newspapers including USA Today, rallied 2.5 percent to $14.66. The company reported second-quarter profit that topped analysts’ estimates, bolstered by growing Internet revenue. Excluding some items, profit was 56 cents a share in the period, beating the 53-cent average estimate by analysts, according to data compiled by Bloomberg.

 

The Ignominy of Being Poor in an Emerging Asia

 

Everybody's talking about Asia's meteoric rise, set against the apocalyptic backdrop of a crumbling Eurozone and the rhetoric of a done-for-good American economy, but why is it so hard to look behind the number-crunching banners of Asian economies that hide a worrisome reality. One that speaks of a glaring socio-economic intolerance that stems from growing income disparities and which rocks the cradle of social inequities that Asia has become synonymous with. Pepsi drinkers in India, today, easily outnumber those with access to clean, drinking water. Finding a working polyclinic in rural Indonesia, Thailand or Cambodia would be far tougher than procuring aphrodisiacs made out of crushed exotic animals. Paved streets are light years away in many parts of Asia. And those that exist have people pissing on them in the absence of access to proper sanitation. Travelers who have walked through the stinky lanes of New Delhi, Mumbai, Calcutta, Kathmandu, Karachi and Islamabad, know exactly what I am talking about. Everyday, thousands do it nonchalantly. No sweat at all. But who cares? Asian politicians? Not at all. In fact Asian GDP junkies have learnt by now, how to manoeuvre their luxurious sedans through the stench of piling trash and human waste. While it's true that emerging Asian economies have seen many cross the poverty line, a cursory glance still finds millions living a pitiable life. And as if living an undignified life was not punishment enough, poverty itself has been made an excuse by the 'haves' in Asia to disregard the 'have-nots'. To be poor in an emerging Asia is now an unspeakable misdemeanour, worse than it ever was. For countless Asians, poverty's curse is homicidal and far more embarrassing than any known Asian taboo. There is an appalling tolerance among the noveau rich for social anomalies such as bribery, dowry, arranged and forced marriages, female infanticide, honour killings and child labour, but no place for the poor and destitute. Poverty's scorn in metropolitan Mumbai or Manila is boorish and the indignity, piercing.For an impecunious person living under the shadow of absurd amount of foreign direct investments and scores of decked-up Asian headquarters of multinational companies, poverty puts a debilitating price on one's mere existence. One that enslaves the desperately poor either as domestic servants, dishwashers, rag-pickers or even as bonded child laborers. Born and brought up in Asia, I have either lived in or visited Asian cities that have unfailingly displayed disdain and contempt for the indigent. Hiring a haplessly poor woman at ruthlessly low wages, to work as a domestic maid and clean toilets, is taken for granted in many parts of South and East Asia. No shame, no remorse at all. And this intolerance for the deprived has only increased with every striking headline of the rising GDPs. On top of it, this economic intolerance of the poor has cemented all prevalent racial, religious, political, social and gender based prejudices and discrimination that plague Asian societies.While I do see more Mercedes and BMWs on the streets of India as many news reports indicate, I also see countless sleeping inside sewer pipes and sniffing industrial glue to beat hunger. For the downtrodden, the story remains the same; whether it is Philippines, Vietnam, Cambodia, Indonesia, China or Thailand. Poverty brings with it a disclaimer that robs the underprivileged of their basic dignity, respect and human rights. With a dismal human rights record, there isn't much hope for the victims of economic discrimination in Asia.So we see mansions built by construction workers who retire at night to their huts made out of disposed plastic bags and packaging material, super-fast highways laid down by men and women who toil relentlessly, all for one meal a day, and state-of-the-art luxury hospitals erected by those who have no access to health care and are guaranteed to be shooed away from these deluxe hospitals the moment they become operational. Wealth is being churned at a pace that shocks business journalists and titillates private fund managers; yet, it remains concentrated within a few iron hands. No wonder, despite amassing huge fortunes not many Asian multi-millionaires have come forth to share their bounty or create growth opportunities for their fellow citizens. The Li Ka Shings, Azim Premjis and Narayana Murthys are between few and far. Where have the rich and proud Indian and Chinese CEOs CFO's and venture capitalists gone into hiding? It is estimated that over 100 million Indians, mostly urban middle-class families, piggybacked on India's rising fortunes and leapfrogged to a better standard of living. However, the remainder of over a billion are yet to experience electricity, drinking water, health care and sanitation. In interior mainland China, millions are yet to be a part of its remarkable growth story, despite their city cousins toting around with Armani and Gucci handbags.The Indian rickshaw-puller, Chinese sweat-shop worker, Vietnamese paddy field farmer and the Indonesian mason are not at all concerned, whatsoever, with the disintegration of the Eurozone or the toxic debts of American banks. Not even with President Barack Obama's re-election bid. If only they could somehow escape the indignity of being caught in the wealth gap just for one day, they could live that day of their life honourably.