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Barclays predicts slower growth in China and US, global growth 2.9% – 05/28/2022

Barclays lowered its growth forecasts for China, the United States and, consequently, the world economy in 2022, after new data was considered weak.

In light of new economic indicators and recent reports from international officials, the Bank began estimating growth of 3.3% for China and 3% for the United States this year, bringing global growth to 2.9%.

“This week’s revisions reduce our overall global growth rate to 2.9%, an average of 3.5% over the last 20 years, and the last recorded global growth figure in 2008. 2008, however, China has been a major supporter of global growth of less than 3%. The country is now the main reason for growth, ”the bank explains.

Barclays’ release of China’s data for April drew attention, which was significantly weaker than expected, meaning the country entered the worst-case scenario expected by the bank, resulting in a 1 percent cut in growth estimates for 2022.

In addition, from the company’s point of view, the growth rate will be lower as the zero tolerance policy for Govt. Less than 3% growth scenarios are no longer “unrealistic,” the company says.

The Davos meeting was tough

The bank drew attention to topics that dominated the discussions in Davos this week: the recession, interest rates and Russia. “Among the WEF (World Economic Forum, its abbreviation in English), GFC (Global Financial Crisis), some players say this year’s meeting was the darkest since the winter of 2009,” Barclays said. A statement ..

For the company, the IMF-World Bank spring meetings in early April had a similarly unsettling atmosphere.

The bank said in a statement that investors could often point out that these moments of collective frustration of the global elite were good indicators for the markets – with stock markets falling and property prices rising in early March 2009 – which saw markets stabilize. The week will be a “possible temporary relief”.

“(There is) little reason to expect a more lasting turnaround when considering the risks of a recession and the geopolitical developments around Russia,” he said.

Barclays believes that the actions and communications of the major central banks have strengthened existing policy positions, such as signals from the US Federal Reserve, a new rise in base interest rates and a focus on restoring price stability.

The move should also be seen by the European Central Bank (ECB), with Christine Lagarde, the company’s chairman, pointing to the rate hike over the next two months with the effects of continuing high inflation.

The bank cited the confirmation of rate hikes in South Korea and New Zealand and expressed surprise that Israel had accepted the same measure. “We expect more hikes next week,” he said, quoting Hungary and Canada.

Tensions are high with Russia and Ukraine

In addition to economic data, Barclays notes that geopolitical tensions are high, especially around Russia’s invasion of Ukraine.

According to the bank, rising energy prices, the risk of disruption to gas supplies in Europe, a global food crisis and a fall in consumer sentiment could significantly ease the global outlook if a solution to the Russia-Ukraine war is found.

However, from the bank’s point of view, the meetings in Davos did not bring any encouraging news. “Although the military situation on the ground appears to have reached a stalemate and Russian troops have had some success in the Donbass, there is no prospect of negotiated peace. Similarly, efforts to find ways to export Ukrainian wheat across the sea Negro do not seem to have gone anywhere,” he said.

Moreover, the Bank reckons that Western efforts to isolate Russia globally are making limited progress.