World economic growth improving, even as U.S., UK potential slows: IMF
The current broad-based global economic upswing will likely be sustained this year and next, the International Monetary Fund said on Tuesday, with gains in most of the world offsetting sluggish outcomes in the United States, Britain and India. The IMF upgraded its global economic growth forecast for 2017 by 0.1 percentage points to 3.6 percent, and to 3.7 percent for 2018, from its April and July outlook, driven by a pickup in trade, investment, and consumer confidence. Forecasts for euro zone, Japan, China, emerging market Europe and Russia were all revised upwards. The growth outlook in the United States was unchanged from the Fund’s July report at 2.2 percent for this year and 2.3 percent in 2018, as expected tax cuts under President Trump’s administration have not yet materialized. The U.S. outlook for 2017 had been cut by 0.1 percentage points, and its 2018 forecast had been cut by 0.2 percentage points in the Fund’s April report, but then revised upwards in July by the same amounts. “Given the significant policy uncertainty, IMF staff’s macroeconomic forecast now uses a baseline assumption of unchanged policies, whereas the April 2017 WEO (World Economic Outlook) built in a fiscal stimulus from anticipated tax cuts,” the Fund said in its revisions to its U.S. economic forecasts.
Asia:
China says will have no problem meeting 2017 growth target, may beat it
China will have no problem meeting its economic growth target of around 6.5 percent this year, and may even beat it, the head of the Statistics Bureau said on Tuesday, confirming widespread market expectations. Steps taken by the government to rein in the overheated property market have also been effective and will remain in place, Ning Jizhe told reporters in a briefing in Beijing. Analysts have expected that full-year growth would meet or exceed the government’s target after the world’s second-largest economy expanded by a stronger-than-expected 6.9 percent in the first half, fueled by heavy government infrastructure spending and a property boom. If growth does beat last year’s 6.7 percent – the lowest in 26 years – it would mark the first acceleration in the growth rate in seven years. As fears of the economy suffering a hardlanding have faded, policymakers have become readier to tackle mounting debt and push forward difficult structural reforms. Ning’s comments came just a week before a five-yearly Communist Party Congress which will be closely watched for any leadership reshuffle and cues on broad policy directions. While the economy could lose some momentum in coming months due to higher borrowing costs and property cooling measures, most analysts believe the slowdown will be moderate.
Europe:
German exports surge in August, shrugging off strong euro
German trade activity picked up in August as exports outpaced imports, widening the surplus and adding to evidence that Europe’s biggest economy performed strongly in the third quarter. Seasonally adjusted exports rose by 3.1 percent on the month while imports were 1.2 percent up, data published on Tuesday showed. It was the strongest export growth reading in 12 months, easing concerns that a stronger euro might dent sales of German goods and services abroad. The figures suggest that the German economy, the euro zone’s growth engine, is set for a solid expansion in the third quarter despite uncertainties about the make-up of the next government following national elections last month. “While financial markets and the ECB have been discussing the risks of a stronger euro, the country which often claims to be export world champion is still enjoying a strong export recovery,” Carsten Brzeski of ING Diba wrote in a note. “Despite the summer lull, the year 2017 should be the best year for German exports since 2010.” Both hard economic data and sentiment surveys have pointed to strong German growth in the July-September period and a solid expansion for the whole of 2017.
U.S.:
U.S. small-cap firms look to spend tax savings on tech, not jobs
A Texas-based chain of strip clubs would go on a buying spree. A growing technology company would move fewer jobs overseas. And a regional bank would boost its spending on cybersecurity. These are some of the uses of the tax savings that small and medium-sized U.S. companies say they would pursue if the Trump administration and the Republican-controlled Congress slashed corporate taxes as promised. Small companies pay the highest taxes and they would be the main beneficiaries of such a Trump windfall. Reuters contacted the 100 largest companies by market value in the benchmark Russell 2000 index of U.S. small and mid-cap stocks as well as another 50 in the Russell 2000 with no analyst coverage. None of the 17 companies that responded to Reuters queries mentioned boosting their headcount. The administration has said the tax cuts would largely pay for themselves by spurring more investment and creating jobs. But companies say they look to spend on technology that will allow them to improve productivity or make acquisitions rather than hire more workers. “We want to be a company of the future, and technology is one of the key ingredients,” said Keith Cargill, chief executive at Dallas-based Texas Capital Bankshares Inc (TCBI.O), a bank with a market value of $4.2 billion. The tax cut would be a “huge plus” for earnings, Cargill said, but with little impact on the bank’s workforce.