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Global Economic Forecast: October 11th 2010

The document summarizes the global economic forecast for October 2010. It notes that the economic recovery has started to soften in major economies due to weak private sector job growth and deflationary pressures. Housing prices remain under downward pressure. While emerging markets like China, India, Brazil and Russia are growing, developed economies in Europe and Japan face high unemployment, fiscal challenges, and weak domestic demand. Commodity prices are expected to be volatile in the near term.

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31 views12 pages

Global Economic Forecast: October 11th 2010

The document summarizes the global economic forecast for October 2010. It notes that the economic recovery has started to soften in major economies due to weak private sector job growth and deflationary pressures. Housing prices remain under downward pressure. While emerging markets like China, India, Brazil and Russia are growing, developed economies in Europe and Japan face high unemployment, fiscal challenges, and weak domestic demand. Commodity prices are expected to be volatile in the near term.

Uploaded by

kritika_09084799
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Global economic forecast

October 11th 2010


The recovery has started to soften, with
the weakness of private-sector jobs
creation giving particular cause for
concern

Inflationary pressures remain very weak


—both the core consumer price index
and the core personal consumption
expenditure index are hovering just
above zero in year-on-year terms

House prices have stabilised, but a large


stock of houses on the market now or
coming in the near future will exert
renewed downward pressures on prices
Europe’s economy is recovering but
the fiscal crisis has raised risks

The economy is burdened with spare


capacity and urgent need for fiscal
consolidation

Unemployment has risen only


moderately owing to wage subsidies,
but employment recovery will be slow

Greece is likely to need a re-


structuring of its government debt
despite a massive rescue package
Export performance in Japan will
deteriorate over the remainder of 2010
and into 2011, partly reflecting a
deceleration of Chinese growth

The urgent need for fiscal consolidation


greatly limits room for further fiscal
stimulus beyond measures already
approved

Weak domestic demand is putting


downward pressure on Japanese prices
again, so that deflation continues
Chinese growth has been supported
by massive stimulus, but this has
aggravated existing imbalances

India is growing strongly on the back


of robust domestic demand. However,
fiscal pressures remain and will act as
a constraint on potential growth

Brazil has been hit less than expected


by the crisis, and has recovered
rapidly on solid domestic consumption

Russia’s recovery is supported by the


rise in oil prices over the past year
Oil consumption growth will bounce
back in 2010, led by the developing
world. OECD consumption growth will
remain subdued

Output restraint and significant spare


capacity in OPEC producers
suggests ample supply. Any
escalation in geopolitical tensions
could disrupt our supply forecasts

Loose global monetary conditions


and investors’ search for return will
support prices
Rising emerging market incomes and
urbanisation will underpin medium-term
demand growth

Years of underinvestment, particularly


in agriculture, will push up prices

In the near-term, many raw materials


suffer from temporary supply shortfalls

Gold prices have been strong, fuelled


by vibrant investor demand, while
fundamentals remain weak. Persistent
economic uncertainty will support
prices in 2010-11
The Federal Reserve will not raise its
policy rate until the third quarter of
2012

The Greek crisis has triggered ECB


bond purchases; the central bank is
also now unlikely to raise rates until
the third quarter of 2012

Japanese policy rates will be held at


emergency levels until late 2012

The European fiscal crisis also raises


new concerns for banking sector
stability
Concerns about the US economy have
helped to weaken the US$ against the
euro in recent weeks

Expectations of earlier rate hikes in the


US and lingering concerns about the
fragility of the euro zone will support the
US$ against the euro over the longer
term

The yen will remain firm against the


US$, reflecting heightened risk
perceptions and Japanese institutional
investors’ home bias
- Sovereigns default as public debt spirals out of control 16
- Developed economies fall into a deflationary spiral 15
- The global economy has a double-dip recession as stimulus fades
15
- New asset bubbles burst, creating renewed financial turbulence
12
- Protectionism takes hold, undermining globalisation 12
- The Chinese economy crashes 10
- The euro zone breaks up 10
- Economic upheaval leads to widespread social and political unrest
9
+ Emerging-market growth surges
8
+ Confidence revives, prompting a stronger rebound in demand 8

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