As we approach the end of January the economic outlook seems to continue on a random walk basis, a mixture of good and bad news.
On the good front, there seems to be a slight move towards optimism internationally. Last year, the forecasts of economic growth all tended to overstate what actually happened, whereas this year the feeling is that in 2012 they may understate growth. This is especially true for Australia, where the forecast of 3.25% growth by the Treasurer might get revised upwards in the budget. Incidentally, that forecast of 3.25% exactly matches the average world growth forecast of 3.25% by the IMF, so despite all the wonders of the mining boom, Australia sits firmly in the “average” camp for expected growth.
Europe? It’s hard to say whether it’s good or bad. Generally a recession across Europe is expected of -0.5% or worse. Greek debt is on a knife-edge but the debt negotations will probably get agreed at the last minute. The good ship SS Europe is on the rocks, while Merkel intends to issue new rules about permitted courses, which will do wonders for the future, but nothing to solve the present problems.
The IMF is trying to drum up support for a raising of a further $500 Billion by warning that 2012 could represent a “1930′s moment”. Put simply, all nations agree that Something Must Be Done to stave off recession, but that Someone Else should do it – no-one wants to put their hand in their pocket to help other countries, and we risk moving towards a defensive world in which each nation decides to look after itself first.
The USA might actually be returning to some level of growth, though the politics of an election year could effect that, but it may actually surprise on the upside. As the world’s largest economy, any upside movement would have a huge impact.