IMF Growth Forecasts Cause More Doom and Gloom
Despite the downgrades to IMF growth forecasts causing more doom and gloom for the markets, at least we have our Dave's speech to look forward to and inspire us.
Despite the downgrades to IMF growth forecasts causing more doom and gloom for the markets
, at least we have our Dave's speech to look forward to and inspire us.
Unfortunately, if you are expecting any surprises about give-aways or radical measures to boost the economy, you'll be sorely disappointed.
The IMF's forecasts act as a sharp reminder that all is not well, not only in terms of the UK's growth prospects, but also for everyone else.
The bottom line is that there simply has to be some cutting back of the state across those economies that have gorged themselves on debt in the past decade or more, particularly in Europe.
As stated by the ECB President yesterday, it's going to be a long, hard road and there really is no alternative.
The path to austerity has to be taken now in order to repair the longer-term prospects for growth. The temptation to borrow more to help boost short-term growth has to be avoided.
The light at the end of the tunnel is that UK growth is expected to have bounced back in the third quarter, with predictions for Q3 GDP ranging between 0.1% and 0.9%.
On top of this, the new government Funding for Lending scheme is expected to kick in properly this month, and the FSA (now FCA) will be relaxing lending rules for UK banks.
The proof of the pudding will be in the eating, but this might help to alleviate the lending squeeze on businesses and consumers.
Even in France, industrial production has come in far better-than-expected this morning, hitting a whopping 1.5% when many had expected a decline of 0.3%.
Of course, the only issue here is that confidence is still at a desperately low ebb. It doesn't really matter how much banks are forced to lend, if businesses aren't confident of their prospects over the next 6 months then they won't want to take the risk.
This stalemate is what's affecting the equity markets
at the moment. Fundamentals are deteriorating, yet investors remain happy to keep faith in equities due to the continued money printing by central banks.
The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.
By Simon Denham, 10 October 2012