Mixed messages from economic gurus
The World Economic Forum’s annual meeting of the great amid the Davos’s snows has been postponed.
It was due to take place from January 17-21.
In its latest World Economic Outlook released last Tuesday, the International Monetary Fund predicts that global growth is expected to moderate from 5.9% in 2021 to 4.4% in 2022—half a percentage point lower for 2022 than in the October World Economic Outlook, largely reflecting forecast markdowns in the two largest economies. A revised assumption removing America’s Build Back Better fiscal policy package from the baseline, earlier withdrawal of monetary accommodation, and continued supply shortages produced a downward 1.2 percentage-points revision for the United States. In China, pandemic-induced disruptions related to the zero-tolerance Covid-19 policy and protracted financial stress among property developers have induced a 0.8 percentage-point downgrade. Global growth is expected to slow to 3.8 percent in 2023.
Glass half full – or half empty?
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In late November stockmarkets fell as news of the Omicron variant filtered out and investors feared either another round of restrictions, or that people would shut themselves away. Two months on, it is, largely, better than feared, according to The Economist. Markets are skittish, but because of the prospect of higher interest rates, rather than Covid-19. Goldman Sachs has constructed a share-price index of European firms, such as airlines and hotels, that thrive when people are able and willing to be in public spaces. The index, a proxy for anxiety about the virus, has surged relative to wider stockmarkets in recent weeks.
OECD data a good predictor
High-frequency economic data back up the cautious optimism. Nicolas Woloszko of the OECD produces a weekly GDP index for 46 middle- and high-income economies, using data from Google-search activity on everything from housing and jobs to economic uncertainty. Adapting his index, which has been a good predictor of the official numbers, The Economist estimates that GDP across these countries is about 2.5% below its pre-pandemic trend. That is a little worse than in November, when GDP was 1.6% below trend, but better than a year ago, when output was nearly 5% below it.
Fed. looking to raise rates
Jerome H. Powell, the Fed. chair, said officials no longer thought America’s rapidly healing economy needed so much support in a New York Times’ report. “I would say that the committee is of a mind to raise the federal funds’ rate at the March meeting, assuming that the conditions are approprriate for doing so,” Mr Powell said. While he declined to say how many rate increases officials expected to make this year, he noted that this economic expansion was very different from past ones, with “higher inflation, higher growth, a much stronger economy—and I think those differences are likely to be reflected in the policy that we implement.”
Can companies deliver?
McKinsey advises that the pandemic has created global supply-chain challenges that have lingered long after the sting of those missing holiday gifts. The inaccessibility of products has created challenges for customers and left businesses scrambling. Many companies have gone back to the drawing board to achieve better results. Reevaluating distribution processes is a huge part of the equation.
And talking of transport, Invictus will shortly deliver Johnny and Juliet Kipps to St Lucia. Lighter winds in the first week of the route followed by a low-pressure causing trouble in the middle have meant the trade winds haven’t developed as expected. The coming week will see most of the fleet cross the finish line in Rodney Bay.