The outlook for the global economy stabilized this month after having been revised downward for three consecutive periods. Improved growth prospects for the Euro area and the United Kingdom offset the United States’ downward revision. FocusEconomics panellists currently expect the global economy to expand 2.5% in 2013, which is unchanged from last month’s projection. However, analysts cut their projections for next year; they expect the global economy to expand 3.3%, which is down 0.1 percentage points from the forecast last month.
The outlook for the Euro area finally improved this month. FocusEconomics Consensus Forecast panellists expect the region’s economy to contract 0.5% in 2013, which is up 0.1 percentage points from the forecasts in July and August. Panellists did not revise their 2014 forecasts and still expect the Eurozone economy to experience a moderate recovery, with a projected output growth rate of 0.9%. The region pulled out of recession in Q2 as GDP expanded 0.3% over the previous quarter. The reading represented the first expansion after six consecutive quarters of negative output growth and marked the end of the longest recession in the history of the common currency area. Forward-looking indicators suggest that the positive trend in the Euro area economy will persist in the coming months; in August, economic sentiment picked up to the highest level since March of last year. On a negative note, the unemployment rate in July was unchanged at 12.1%—a record high level—despite the second consecutive drop in the number of unemployed.
Second consecutive downward revision for the United States
In the United States, the outlook continues to be clouded by the possibility that the Federal Reserve will taper the monetary stimulus, along with renewed fiscal uncertainty caused by the looming debt ceiling which the country is expected to hit by mid-October. Against this backdrop, FocusEconomics panellists cut their projections by 0.1 percentage points compared to last month. Panellists currently expect the U.S. economy to grow 1.7% in 2013, which marks the second consecutive downward revision. The panel expects the economy to grow 2.7% in 2014, which is unchanged from last month’s forecast. Economic indicators painted a positive picture overall, which reinforces the view that the Federal Reserve will begin tapering its asset purchase program sooner than had been expected.
Japan’s outlook stabilizes following seven consecutive upward revisions
In Japan, the outlook stabilized following seven consecutive upward revisions. FocusEconomics panellists did not change their projections from last month for 2013 and 2014. The panel currently expects the Japanese economy to grow 1.7% this year. In 2014, the Japanese economy is expected to grow 1.6%. Japan’s economic activity decelerated in the second quarter. GDP expanded at an annualized rate of 2.6% over the previous quarter in seasonally-adjusted terms, falling short of the 3.8% rise seen in Q1. Against this backdrop, speculation is mounting that the government may delay plans to implement the controversial sales tax increase scheduled for next year. While the tax hike is needed to restore government finances, it has the potential to derail Japan’s economic recovery. Prime Minister Shinzo Abe is expected to make a decision on how to proceed by early October.
Outlook for the BRIC economies unchanged as China stabilizes
Following five consecutive downward revisions, FocusEconomics panellists kept their 2013 projections for the BRIC countries unchanged from last month. The panel still expects the group of emerging economies to expand 5.9% this year. The result stemmed largely from unchanged prospects for China—which represents the largest share of the BRIC economies—while the outlook was revised downwards for Brazil, India and Russia. In 2014, the BRIC economies are projected to expand 6.2%, also unchanged from last month’s estimate.
Regarding price developments, panellists kept their global inflation expectations unchanged amid stable forecasts for the majority of the countries surveyed. FocusEconomics Consensus Forecast panellists expect global inflation to reach 2.6% in 2013, on par with last month’s projection. For 2014, panellists did not change their forecast from last month and still see inflation picking up to 2.9%.Note: This is an excerpt from the FocusEconomics Consensus Forecast Major Economies –September 2013, published September 3th, 2013. The full report (117 pages, covering the G7 economies and the Eurozone plus an overview of the BRIC economies (Brazil, Russia, India and China) is available for immediate download at the FocusEconomics Online Store). For more information and a free sample of the report please visit our website.