The IMF is more confident about the global economy as more figures show that the Australian and Chinese economies are in solid shape, but Japan’s incipient recovery continues to show signs of tiredness.
The IMF’s second major global forecast has upgraded world growth next year to 3.1%, compared with the July update forecast of 2.5%.
The Fund said China’s economy will jump by 9% next year, India by 6.4%, but the US will edge up by a sedate 1.5%, Japan, 1.7% and the euro region, just 0.3%.
The news came after we had more signs that the Australian and Chinese economies are still in solid shape, but Japan’s incipient recovery continues to show signs of tiredness.
An American index on manufacturing fell, September car sales were poor, jobless numbers rose last week and that helped send European and US markets down sharply on he first day of the new quarter.
The Performance of Manufacturing Indexes (PMI) for Australia and China both showed rises in September, pointing towards continued expansion.
“The global economy appears to be expanding again, pulled by the strong performance of Asian economies and stabilization or modest recovery elsewhere,” IMF said in its semi-annual World Economic Outlook.
But it tempered that upbeat statement with forecast that the rebound will be “sluggish, credit constrained, and, for quite some time, jobless.”
The world economy will contract 1.1% this year, less than the 1.4% in July.
The advanced economies including the U.S., Germany and Japan will continue to lead the slump, shrinking 3.4%, but emerging economies will grow by an expected 1.7% over 2009.
The IMF said the US economy will grow next year at almost double the 0.8% rate seen three months ago after contracting by 2.7% this year.
US unemployment (September’s figures are out tonight, our time), will exceed 10.1% in the second half of next year.
The 16-country euro economy will shrink 4.2% this year, less than the 4.8% forecast in July.
The forecast for 1.7% growth in Japan next year is unchanged from a July forecast.
The 5.4% contraction it predicted for this year is 0.6 percentage point less than in July.
In Japan yesterday, the latest Tankan survey of big company manufacturing showed a second successive rise in quarterly confidence, but despite that, the survey also picked up plans by the same companies to cut more deeply into investment and other spending over the next six to nine months.
In Australia the PMI from the Australian Industry Group-PricewaterhouseCoopers rose 0.3 index point to 52.0 points in September, the highest it has been for 21 months.
It was the second consecutive month the index has come in above the key 50 level separating expansion from contraction.
It’s a further sign the sector is regaining confidence and strength after the long 18 months slide.
It may add to the feeling inside the Reserve Bank that conditions are healthier enough to allow a rate rise, possibly at next Tuesday’s board meeting.
And, according to the IMF, Australia will record modest growth of 0.7% in 2009 and 2.0 per cent in 2010.
This means Australia will be the only advanced economy to record positive growth in 2009, and compares to the expected contraction of 3.4% for advanced economies in 2009.
In China a similar measure called the Purchasing Managers Index rose to a seasonally adjusted 54.3 last month from 54.0 in August.
The Government-run Federation of Logistics and Purchasing said the rise in the index shows the economy is continuing to respond to the stimulus package announced last November.
The survey showed that new export orders component of the PMI rose to 53.2 in September, compared with 52.1 in August,
A manufacturing index for China, released by the ban, HSBC Holdings yesterday also showed an expansion in September to around 55.
The odd one out was the results of the Tankan index of sentiment. It’s the most widely accepted measure of corporate sentiment in Japan and while it showed an improvement, confidence remains below positive levels.
It climbed to minus 33 in the September quarter from minus 48 in June and a record low of minus 58 in March (A negative number means pessimists outnumber optimists).
Sentiment among large non-manufacturers also improved to minus 24 in September from a reading of minus 29 in June.
That was better than economists’ forecast of minus 26.
Despite that obvious improvement, the report showed that big companies plan deeper spending cuts as profits slump, an indication that economic recovery is far from robust.
Large Japanese companies plan to cut capital spending by 10.8% in the year to next March, according to the latest survey, up from the 9.4% fall seen in the June Tankan.
As investment and capex are the major drivers of Japanese investment growth (which in turn are linked to industrial production and exports) the news is not good for the economy which shows some signs of a struggle between deflationary pressures, high jobless numbers and still weak demand for manufactured goods at home and abroad.
Through the Tankan there are signs of better outcomes in the June to September period than actually forecast earlier in the year, but the outcomes were still deeply negative, especially for most forms of manufacturing, which forms the heart of the Japanese economy.
Big companies see profits falling 22% in the year e
