The year 2012 was turbulent for the global economy and the outlook has deteriorated since our last forecast. Now the IMF expects that output will remain strong in many emerging markets and developing economies, but that the advanced economies will experience more sluggish growth in the years to come.
To boost GDP growth, legislators in the US must raise the debt ceiling whilst ensuring that medium-term fiscal plans for the country stay sustainable. In Outright Monetary Transactions, the European Central Bank has found an efficient weapon in the battle against recession. But the European medium-term outlook is still uncertain if not outright weak, as the monetary weapon from the ECB requires further economic integration amongst the EU member states to be most efficient.
The export industries in the emerging and developing countries were severely hit when demand for imports fell in the advanced economies following the financial crisis. If the demand continues to fall short of expectations, the emerging and developing countries should respond with an expansionary monetary and fiscal policy.
Despite the multiple uncertainties that surround global growth prospects in 2013, BIMCO has elected to be cautiously optimistic, and believes that 2013 will be the turning point on the macroeconomic scene. Recent positive political initiatives underpin this view.
With Obama re-elected at the White House, focus is back on ‘real matters’. US politicians must act to tackle the ‘fiscal cliff’ and not introduce tax increases and cuts in public spending. Anything else could seriously impact growth.
Leading indicators of consumer demand from the housing market suggest a positive development with housing starts and building permits at unexpected highs. Homebuilding has now climbed so high that it could add to GDP growth this year for the first time since 2005. Finally, home sales have been climbing gradually facilitated by record low mortgage rates.
Good news emerged from China, as the final numbers confirmed the rise above the 50 threshold level of the HSBC/Markit Manufacturing PMI, coming in at 50.5 in November. This was the highest PMI since October last year, representing a cycle that brought about lower GDP growth, as export markets crumbled. Now the indicator signals increasing new export orders and a strengthened demand are linked to Europe and the US by anecdotal evidence.
Bad news emerged from the world’s third largest economy, Japan, as they released GDP growth for the third quarter of 2012 which was down 0.9% from the second quarter. Lower exports, in particular to China, and lower private consumption were to blame. On 30 November, the Japanese government approved yet another stimulus package, roughly twice the size of the stimulus package passed last month. Nevertheless, the package is seen by analysts to be too small to cure the faltering economy.
The Markit Eurozone Manufacturing PMI has signaled deterioration in manufacturing business conditions in each of the past 16 months. Contractions were indicated for almost all of the countries covered by the Markit survey, the sole exception being Ireland. It is important to note that rates of decline eased in Germany, France and Spain.
According to Markit: “The picture is nevertheless starting to brighten somewhat, with the PMI appearing to have bottomed out back in July. Production and employment look set to fall at reduced rates in coming months as export demand slowly revives in markets such as the US and Asia.”
BIMCO continues to believe that 2013 will produce higher global GDP than in 2012 and increased growth in global trade. This is largely based on the latest indications from the IMF forecasts for 2012 and 2013 along the following lines: China up from 7.8% in 2012 to 8.2% in 2013, India up from 4.9% to 6%, EU up from -0.4% in 2012 to 0.2% in 2013, and world trade growth in goods and services up from 3.2% in 2012 to 4.5% in 2013.
The world GDP may grow as such, but in terms of shipping demand, the distribution of trade growth is of immense importance, especially for those shipping segments that may feel the positive effects early.
Regarding the US, BIMCO expects that policy-makers will act responsibly and take the steps necessary to avoid the fiscal cliff. Likewise, BIMCO expects European policymakers to do the same in their quest to return confidence to consumers and bring an end to the debt crisis in the Eurozone. Unless these critical issues are resolved successfully, they will become a burden that drags the global economy in the wrong direction and away from an urgently-needed sustainable recovery. While we remain optimistic, these issues hold the key to ‘make or break’ BIMCO’s forecast in the short and medium-term.
Written by Peter Sand, BIMCO.
This is the first of a four-part summary of the BIMCO Shipping Market Overview & Outlook 2012-13. The full report can be accessed here.
Read the article online at: https://www.worldcement.com/special-reports/19122012/macroeconomics_bimco_december_forecast_797/