Week 23/08 to 03/08
The IMF updated its global economic growth forecasts last week. This update, coming just six weeks after the initial forecast was released, is a major update. For the global economy, the IMF now predicts +4.9% year-on-year growth (yoy) in 2022 (an increase of +0.5% from the April estimate).
Within that figure, advanced economies saw the biggest growth improvements, averaging +0.8% up on estimates. Among them, the US took the biggest hit of all, as its growth forecast rose from +3.5% to +4.9%. By contrast, the IMF has kept growth forecasts for emerging markets stable, reflecting the disparity in access to Covid vaccines and the relative ability of countries to provide fiscal support to their economies. The important takeaway from the latest IMF communication is that global growth remains strong, despite near-term headwinds stemming from a resurgence of Covid in several countries.
An update on the latest macroeconomic data releases
Last week saw several major economic data releases in the US. IHS Markit US Manufacturing PMI fell to 61.2 in August, below forecasts but clearly above the crucial “50” level. which indicates economic expansion. Existing home sales increased +2% MoM in July (well above market expectations), while new home sales increased +1% (in line with expectations). The median existing home price for all home types was $359,900 in August, representing a year-over-year increase of nearly +18% and the 113th consecutive month of year-over-year gains, a very strong indication of a buoyant housing market. In U.S.A.
In China, industrial production increased by +6.4% year-on-year in July, missing expectations but remaining at a healthy positive rate. This is the lowest reading for this metric in twelve months and is likely caused by the issue of supply bottlenecks and the recent outbreaks of Covid cases in China that are holding back activity. Retail sales rose +8.5% yoy in the same month, also missing expectations but maintaining positive momentum and again likely based on the near-term impact of renewed Covid restrictions and delays in supply chain.
The IHS Markit Flash Composite PMI for the Eurozone region came in at 59.5 in August, down from 60.2 in July, but still remains well above 50, still indicating "expansion." Growth estimates showed the eurozone recovered from a technical recession (defined as two consecutive quarters of contraction) last month, when growth for the second quarter of 2021 was +2%.
Sources: Bloomberg, Yahoo Finance, Marketwatch, MSCI. Copyright © 2022 Dominion Capital Strategies, All rights reserved