WASHINGTON: The global economy is on edge - and that’s without the US “fiscal cliff.” Among rich nations, the US outlook remains the least troublesome. But given a recession in the eurozone and a recent contraction in Japan, that’s not saying a lot.
At the same time, many emerging markets are hurting. India is likely to log its weakest growth in a decade this year and Brazil’s economy is also sputtering. Luckily, growth in China appears to be firming.
In the United States, the economy faces growing challenges even without the ongoing political wrangling over the $600bn in government spending reductions and expiring tax cuts set to kick in at the start of next year.
The coming week brings a slew of reports expected to show the US economy struggling. Data on Friday will likely show employment growth slowed to just 100,000 jobs last month from 171,000 in October, according to a Reuters poll of economists. US manufacturing data this week is also likely to suggest a fourth-quarter slowdown is at hand.
Indeed, some worry the fourth quarter, which has been affected by the impact of superstorm Sandy, will bring the world’s largest economy remarkably close to stall speed.
“The risk of seeing a negative sign in front of fourth-quarter GDP is nontrivial, to say the least,” said Tom Porcelli, economist at RBC Capital Markets. Following figures showing consumer spending fell in October for the first time in five months, Porcelli revised down his forecast for fourth-quarter US GDP growth to a 0.2 percent annual pace from 1 percent.
The United States’ travails come against a troubling global backdrop. Europe is still a mess. Greece’s latest debt deal quelled immediate concerns of a financial market meltdown, with terms of the country’s bond buy-back plan likely to be announced early this week. But the country remains mired in a deep depression, with little prospect for recovery, and not everyone is convinced it will be able to remain a part of the single currency.
Other global engines of growth also look to be softening. Not only did growth slow in India and Brazil in the third quarter, but it braked in Canada as well. China now may be the exception, with a gauge of factory activity hitting a seven-month high in November.
Reuters
