Global economy: Stable outlook for the second consecutive month

The outlook for the global economy was stable for the second consecutive month. Improved growth prospects for the Euro area, Japan and the United Kingdom offset downward revisions to Canada and the BRIC economies. FocusEconomics panelists currently expect the global economy to expand 2.5% in 2013, which is unchanged from last month’s projection. Analysts also kept their projections for next year unchanged from last month and expect the global economy to expand 3.3%.

photo by ruffrootcreative

photo by ruffrootcreative

Euro Area: Outlook improves for the second consecutive month

The outlook for the Euro area improved for the second month in a row. FocusEconomics Consensus Forecast panelists expect the region’s economy to contract 0.4% in 2013, which is up 0.1 percentage points from last month’s forecast. Panelists also revised their 2014 forecasts and expect the Eurozone economy to expand 1.0%, which is up 0.1 percentage points from last month’s projection. More detailed estimates confirmed that the region has pulled out of the longest recession in its history. The recovery remains, however, feeble and erratic; industrial production unexpectedly dropped in July, contrasting the positive result recorded in the previous month. On a positive note, economic sentiment picked up to the highest level in over two years in September, suggesting that the Euro area economy’s positive trend will firm in the coming months. That said, doubts about the region’s recovery are emerging in the political arena. In particular, recent political turmoil in Italy has sparked concerns among investors that the Euro crisis may flare up once again.

United States: Government enters a partial shutdown

In the United States, the outlook stabilized following two consecutive downward periods of revision. FocusEconomics panelists expect the U.S. economy to grow 1.7% in 2013, which is unchanged from last month’s projection. The panel expects the economy to grow 2.7% in 2014, which is also unchanged from last month’s forecast. On 1 October, the U.S. government entered a partial shutdown for the first time in 17 years. The shutdown was caused by the inability of the Republicans—who control the House of Congress—and the Democrats—who hold a majority in the Senate—to reach an agreement to pass a budget, unless it involved a delay in the implementation of the healthcare system overhaul commonly known as Obamacare. Analysts believe that the current situation may have a larger impact than the previous shutdown in 1995, because of the weak state of the country’s economic recovery.

photo by Max Z

photo by Max Z

Japan: Improving outlook for the eighth time in the last nine months

In Japan, the outlook for 2013 improved for the eighth time in the last nine months. FocusEconomics panelists currently expect the Japanese economy to grow 1.8% this year, which is up 0.1 percentage points from last month’s projection. In 2014, the Japanese economy is expected to grow 1.7%, which is also up 0.1 percentage points from last month’s forecast. On 1 October, Prime Minister Shinzo Abe announced a significant increase in the sales tax, from 5% to 8%, starting in April 2014. The sales-tax increase aims at reining in Japan’s soaring public debt, but it also has the potential to derail the nascent economic recovery. In order to protect the economy, the government is set to unveil a USD 50 billion stimulus program, which will likely include a cut in the corporate tax.

Downward revisions for the BRIC countries

FocusEconomics panelists cut their 2013 projections for the BRIC countries once again. The panel expects the group of emerging economies to expand 5.8% next year, which is down 0.1 percentage points from last month’s estimate. The result stemmed from lower growth prospects for Russia and India, which more than offset stronger projections for Brazil and China. In 2014, the BRIC economies are projected to expand 6.0%, which is down 0.2 percentage points from last month’s forecast.

Global inflation prospects remain stable

Regarding price developments, panelists kept their global inflation expectations unchanged, as upward revisions for the United States and Japan were offset by downward revisions for Canada and the United Kingdom. FocusEconomics Consensus Forecast panelists expect global inflation to reach 2.6% in 2013, on par with last month’s projection. For 2014, panelists 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 – October 2013, published October 1st, 2013. The full report (119 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.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s