Where is growth going?

Posted by: Paul Donovan

25 Jun 2020

Daily update

  • The IMF revised down its global growth forecasts from something to something else yesterday. International organizations tend to lag behind—other economists are revising up. The IMF has been too pessimistic on growth in 27 of the past 30 years. It tends to be significantly too pessimistic when there are big structural changes.
  • Some US states are insisting on quarantines for people arriving from some other states. Legal immigration into the US was restricted earlier this week. Both measures will reduce the efficiency of the US labor market and slow job creation. However, if they are short-term measures the damage should be limited.
  • US first quarter GDP will be revised today. Globally, there is a bias to revise up first quarter data—statisticians have to guess what happened in March in the initial data releases. They tended to be too pessimistic about the lockdowns. Rising virus cases in the US have worried markets—the level of fear among consumers is what matters economically.
  • Reports suggest the interminably tedious EU-UK divorce will drag on until October. It is a tradition of the EU that any deal must be agreed at the last minute by sleep-deprived politicians. There is optimism about a compromise, however.

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