IMF: Global economic growth still solid

Posted Apr 5th 2007 3:35PM by Joseph Lazzaro
Filed under: Major Movement, Other Issues, Good news, General Electric (GE), India, China, Brazil, Russia, Middle East, Venezuela, Thailand, Caterpillar (CAT), Boeing Co (BA), Mexico, Canada, Japan, Economic Data, Deere and Co (DE)

The global economy will remain resilient, despite an economic slowdown in the U.S, the International Monetary Fund concluded in its semi-annual World Economic Outlook, released Thursday. The IMF expects the global economy to grow about 5% in 2007, which is a healthy economic expansion rate.

Further, the IMF report argued that concerns about a global recession triggered by a substantial slowdown in the U.S. economy were not supported by historical evidence, if previous global recessions are any indicator of the phenomenon.

Global growth typically declines sharply when there are synchronized adverse events that affect many countries at the same time, said IMF Chief Economist Simon Johnson. None of the three major economic regions of the world: the U.S., European Union, and Japan-China is in recession, a strong argument against any conclusion predicting a global slowdown, let alone a global recession.

Specifically, the U.S economy is projected to grow 2.6% in 2007, although it is probably growing at a slower rate currently, in Q2. The EU is most likely growing at a faster rate, Japan's economy grew 1.3% in Q4 2006 and will probably grow about 1.0% in 2007, and China's economy is expected to grow better than 7% and probably much faster than that -- despite the Chinese Government's efforts to cool its surging economy. The aforementioned argues for a global economy that will continue to experience at least moderate growth in 2007, a point that the IMF sought to support with its semi-annual report.

Further, the report is good news for companies levered to the global economy, such as Caterpillar (NYSE: CAT), General Electric (NYSE: GE), Boeing (NYSE: BA), and Deere (NYSE: DE), whose businesses include massive international operations. The stock prices of these "international cyclicals" had suffered earlier this year when concerns grew regarding a global slowdown. Subsequent regional economic data has dispelled those concerns, with the IMF report underscoring that most economies outside the U.S. are in pretty good shape.

Tags: BA, Boeing, CAT, Caterpillar, DE, Deere, GE, GeneralElectric