The IMF Cut Its Global Forecast -- What Does That Mean for Us?

April 17, 2013
While the IMF’s cut to its global forecast may garner headlines, the true story can be found in the economic leading indicators.

The headlines jumped out at readers – things must be getting worse because the IMF cut its outlook for the globe for 2013! Terrible things must be happening! Despite the fantastic headline, the IMF actually only cut their global outlook by 0.2%. You would never have noticed if an excited press had not trumpeted the non-news. 

The stated reasons are also a snooze – Europe’s persistent recession (you already knew that) and a spring “swoon” in the U.S. economy. You already knew that the U.S. economy was going to slow as the year progressed because of pressures on American consumers and the follow-on impact on business and hiring trends.

The article then goes on to state that they are forecasting that the U.S. and China will lead the way into a global rally in 2014. Dream on. The Chinese have already stated that they are planning for slower growth in the coming years – not a hot economy that will boost the global economy. Three of our trusted leading indicators are already indicating that 2014 will see at least a slower rate of rise in the US economy. 

Lastly, the IMF re-states its preference for stimulus spending over austerity. They are concerned that planned U.S. cuts are too severe, fueling the rhetoric of Keynesian minded economists. A slim 1.6% cut in the U.S. budget is hardly severe; it does not even measure up to austerity in my mind. 

My advice, ignore the IMF and keep watching trusted leading indicators through ITR Economics. Together we will have an accurate and dependable view of the future.

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