Under the radar: IMF report on recovery contains good news, bad news

The good news is the IMF believes the global economy is recovering -- ending the world's longest and worst global contraction since the end of World War II.

The bad news is that the IMF, in-line with macroeconomic projections form other organizations, says the global economy must continue to undertake structural changes to eliminate global imbalances.

One key imbalance: low consumption, or the lack of consumers in emerging markets. Consumption in the world's largest economy, the United States, will not quickly return to pre-financial crisis levels, as Americans rebuild nest eggs devastated by the the stock and housing market sell-offs, the IMF said. Americans are also making up for a near-decade of unsustainable overconsumption, fueled in many cases by home equity loans and refinancings during the leveraging bubble. The IMF added that the U.S. savings rate will likely remain high.

To compensate for the lower percentage of U.S. consumption in global GDP, emerging markets, particularly China/Asia, must increase consumption and commercial activity, the IMF said.

Economic Analysis: Another forecast confirming the U.S.'s 'frugal consumer' era and the serious problem of underconsumption outside the U.S. Simply, emerging markets must consume more or global growth with not come close to historic GDP growth rates. In other words, in a nutshell, we have a world where lots and lots of stuff is being manufactured but there aren't nearly enough consumers and markets for the stuff. So the charge for emerging market policy makers is clear: find ways to increase demand and increase consumption in your local economies, and soon.