Emerging Markets Disappoint But Developed Economies Keep Global Economic Growth Modest

Online, June 25, 2013 (Newswire.com) - Evidence of a pickup in global growth outside the U.S. is unlikely to emerge in the next few months. With overall global GDP growth, outlooks seem slightly less optimistic than last quarter. Estimates for emerging markets, like China, India and Brazil, were revised down significantly, though global GDP forecasts were recast lower by less than 1 percent for both 2013 and 2014. Growth forecasts for developed economies remained stable.

Recent reports caution that the emerging markets outlook is specific to each country, with Mexico, the Philippines and Malaysia deserving positive attention from investors. Local bonds in Mexico, Brazil, Thailand and Russia are also worth further attention.

China's economy is still struggling through a difficult transition. A growth model dominated by investments and exports can't continue indefinitely, with the time ripe for a Chinese transition to a consumer economy dominated by a robust service sector, but those sectors are not yet ready to prosper, and that's a primary reason why Chinese growth has slowed.

Growth forecasts for China were revised downward to 7.4 percent for 2013 and 2014, down from 7.9 percent and 8.1 percent, respectively, in previous quarterly forecasts.
Europe will not likely be a source of major economic scares and shocks this year, and consumer spending in Japan is up on the back of optimism about Abenomics and ahead of expected consumer taxes imminent in 2014.

Despite nervousness about monetary policy, the U.S. appears on track to deliver the strongest growth in 2014 since the start of the economic recovery. U.S. fiscal tightening will have largely played out, housing will still be in a sharp uptrend, the wealth effect on consumption from rising stock and house prices may well be at its peak, and monetary stimulus will remain extraordinarily supportive.