Tue, 17th January 2017

Anirudh Sethi Report


Archives of “Economy” Category

World’s fastest-growing large economy – the two-horse race with a new leader

China is the new fastest-growing large economy says the IMF

The Fund has published its report for 2016 growth rates
  • Says India shot itself in the foot (there’s a lot of that going around) when it cancelled 90% of its cash in circulation
(ps. I’ll quit it with the mixed metaphors now)
India’s growth slowed to 6.6% in 2016 from 7.6% in 2015
  • China’s economy grew by 6.7% in 2016
IMF says 2017 growth in India, though, is expected to be 7.2%, which will put it back in front
Then 7.7% projected for 2018
  • China forecast is 6.5% in 2017 % 6.0% the following year

(ps. The IMF admits these forecasts are unlikely to be precise)

IMF says demonetisation a big dampener, cuts India’s growth to 6.6% from 7.6%

The IMF today cut India’s growth rate for the current fiscal year to 6.6 per cent from its previous estimate of 7.6 per cent due to the “temporary negative consumption shock” of demonetisation, days after the World Bank also decelerated India’s growth estimates.

“In India, the growth forecast for the current (2016–17) and next fiscal year were trimmed by one percentage point and 0.4 percentage point, respectively, primarily due to the temporary negative consumption shock induced by cash shortages and payment disruptions associated with the recent currency note withdrawal and exchange initiative,” the International Monetary Fund (IMF) said in its latest World Economic Outlook (WEO) update released today.

The IMF said that after a lacklustre outturn in 2016, economic activity is projected to pick up pace in 2017 and 2018, especially in emerging market and developing economies.

Economic activity in both advanced economies and emerging market and developing economies (EMDEs) is forecast to accelerate in 2017–18, with global growth projected to be 3.4 per cent and 3.6 per cent, respectively, again unchanged from the October forecasts, it said.

As per new IMF projections, India’s growth in 2016 is now estimated to be 6.6 per cent as against 7.6 per cent earlier forecast.

IMF economist Obstfeld: Debt presents overhang to world economy

Comments from IMF economist Obstfeld after the latest world growth estimates

  • We see wider dispersion of risks, tilted to the downside
  • Trade disruption is a downside risk that isn’t included in baseline case
  • Effects of Brexit are likely to be complex
  • A US fiscal expansion would have positive spillover effects
  • We know direction of US policy but not the specifics
  • All nations would lose from a trade war
  • Some US proposals could hurt the US even without a trade war
  • Fixing Italy’s banking sector would boost growth
  • Fed independence must be maintained and a strict legal rule would tie it’s hands

IMF leaves 2017 global growth outlook at 3.4% but country forecasts shaken up

No change to the global outlook but many country tweaks for 2017

  • UK growth seen at +1.5% vs +1.1%
  • US seen at 2.3% vs 2.2%
  • Eurozone seen at 1.6% vs 1.5%
  • Italy seen at 0.7% vs 0.9%
  • Japan seen at 0.8% vs 0.6%
  • Canada unchanged at 1.9%
  • India seen at 7.2% vs 7.6%
  • China seen at 6.5% vs 6.2%
  • Brazil seen at 0.2% vs 0.5%
  • Mexico seen at 1.7% vs 2.3%
  • Saudi Arabia seen at 0.4% vs 2.0%

Lots of winners and losers on that list. In general, Latam and the Middle East drag down small improvements in developed countries. For 2018, they see global growth picking up slightly to 3.6%.

For many years, the IMF has released high estimates and then lowered them as they neared. For a change, they’re raising them. That might just reflect the optimism in the air.

BOJ raises assessment for 3 of 9 regions, 6 unchanged

   That’s the (screenshot of the) summary of the summary, in very brief.
So that is slow going, but at least its moving in the right direction, For now.
This report summarizes the reports from all regional research divisions, mainly at the Bank’s branches in Japan, and is based on data and other information gathered for the meeting of general managers of the Bank’s branches held today.

China Xinhua again: Chinese economy likely to hit bottom in 2017

Some weekend China press from Xinhua (official press agency of China), quoting economist Wang Yiming, deputy director of the development research center of the State Council:

  • If investment, supply-side structural reforms and the fostering of new growth momentum achieve desired results, there is a high probability that the economy may bottom this year
  • On the demand side, manufacturing investment is on the up, while infrastructure spending will remain strong, which mean overall investment will stabilize in 2017
  • If China’s capacity-cut targets are solidly delivered, producer prices will keep going up to support the broader economy
There is quite a few ‘ifs’ in there.
The piece also notes the IMF forecast for China growth this year:
  • 6.5%
  • & the IMF says  the economy will continue sustainable growth as it is rebalancing from manufacturing to services, despite reemerging concerns for property markets

Inflation eases to 3.41 per cent in December, industrial output up by 5.7 per cent

The annual consumer price inflation eased to 3.41 percent in December, its lowest level in more than two years, helped by a sharp cooling in food prices, government data showed on Thursday.

Economists had expected annual retail inflation to come in at 3.57 percent last month, compared with 3.63 percent in November. Food inflation was 1.37 percent last month, lower than a revised 2.03 percent in November.

Meanwhile, the industrial production grew by 5.7 per cent in November against contraction of 3.4 per cent same month last year.

November 2016 Eurozone industrial production 1.5% vs 0.5% exp m/m

November 2016 Eurozone industrial production report 12 January 2017

  • Prior -0.1%. Revised to 0.1%
  • 3.2% vs 1.6% exp y/y. Prior 0.6%. Revised to 0.8%

Some more cheer for Europe. Strong numbers, and intermediate & non-durable consumer goods did the best out the lot. That suggests there’s demand coming from consumers.

Brazil slashes rates by 75bps to 13% in surprise move

Don’t anyone accuse Brazil’s central bank of not being bold.

In a unanimous decision, the bank cut its policy interest rate by 75 basis points on Wednesday, exceeding the consensus call for a 50bps cut and sharply picking up the pace on an easing cycle it began with two back-to-back cuts of 25bps each in October and November

In a statement, the bank said economic activity had fallen below expectations and that a recovery would take longer than previously anticipated.

The size of the cut will be welcomed by many, given the economy’s stubborn refusal to return to growth. The rebound expected by many when congress ditched president Dilma Rousseff last year has failed to happen. GDP contracted by 8 per cent over the past two years under Rousseff’s watch; her pro-growth, market-friendly successor, Michel Temer, was expected to turn things round quickly.