Category Archives: Global economic condition

4/4/19: BRIC PMIs for March Show Improved Growth Conditions


With March PMIs reported by Markit in, here are the monthly frequency trends for the BRIC economies activity, based on composite PMIs:


Overall BRIC activity as signalled by PMIs remains range-bound in the tight, low activity range over the last 6 years (second chart above). However, the composite activity is running close to the upper bound of the range, implying overall stronger performance in the recent month. This is confirmed by the first chart above, showing that both Russia and ex-Russia BRIC economies activity is accelerating on trend since July 2018.

More analysis, based on smoother quarterly data forthcoming, so stay tuned.

4/4/19: BRIC PMIs for March Show Improved Growth Conditions


With March PMIs reported by Markit in, here are the monthly frequency trends for the BRIC economies activity, based on composite PMIs:


Overall BRIC activity as signalled by PMIs remains range-bound in the tight, low activity range over the last 6 years (second chart above). However, the composite activity is running close to the upper bound of the range, implying overall stronger performance in the recent month. This is confirmed by the first chart above, showing that both Russia and ex-Russia BRIC economies activity is accelerating on trend since July 2018.

More analysis, based on smoother quarterly data forthcoming, so stay tuned.

19/10/18: IMF’s Woeful Record in Forecasting: Denying Secular Stagnation Hypothesis


A recent MarketWatch post by Ashoka Mody, @AshokaMody, detailing the absurdities of the IMF growth forecasts is a great read (see https://www.marketwatch.com/story/the-imf-is-still-too-optimistic-about-global-growth-and-thats-bad-news-for-investors-2018-10-15?mod=mw_share_twitter).  Mody's explanation for the IMF forecasters' failures is also spot on, linking these errors to the Fund's staunch desire not to see the declining productivity growth rates (aka, supply side secular stagnation).

So, to add to Mody's analysis, here are two charts showing the IMF's persistent forecasting errors over the last four years (first chart), set against the trend and the cumulative over-estimate of global economic activity by the Fund since mid-2008 (second chart):




While the first chart simply plots IMF forecasting errors, the second chart paints the picture fully consistent with Mody's analysis: the IMF forecasts have missed global economic activity by a whooping cumulative USD10 trillion or full 1/8th of the size of the global economy, between 2008 and 2018. These errors did not occur because of the Global Financial Crisis and the high degree of uncertainty associated with it. Firstly, the forecasting errors relating to the GFC have occurred during the period when the crisis extent was becoming more visible. Secondly, post GFC, the hit rates of IMF forecasts have deteriorated even more than during the GFC. As Mody correctly points out, Fund's forecasts got progressively more and more detached from reality.

At this stage, looking at April and October 2018 forecasts from the Fund's WEO updates implies virtually zero credibility in the core IMF's thesis of a 'soft landing' for the global economy over 2019-2021 time horizon.

19/10/18: IMF’s Woeful Record in Forecasting: Denying Secular Stagnation Hypothesis


A recent MarketWatch post by Ashoka Mody, @AshokaMody, detailing the absurdities of the IMF growth forecasts is a great read (see https://www.marketwatch.com/story/the-imf-is-still-too-optimistic-about-global-growth-and-thats-bad-news-for-investors-2018-10-15?mod=mw_share_twitter).  Mody's explanation for the IMF forecasters' failures is also spot on, linking these errors to the Fund's staunch desire not to see the declining productivity growth rates (aka, supply side secular stagnation).

So, to add to Mody's analysis, here are two charts showing the IMF's persistent forecasting errors over the last four years (first chart), set against the trend and the cumulative over-estimate of global economic activity by the Fund since mid-2008 (second chart):




While the first chart simply plots IMF forecasting errors, the second chart paints the picture fully consistent with Mody's analysis: the IMF forecasts have missed global economic activity by a whooping cumulative USD10 trillion or full 1/8th of the size of the global economy, between 2008 and 2018. These errors did not occur because of the Global Financial Crisis and the high degree of uncertainty associated with it. Firstly, the forecasting errors relating to the GFC have occurred during the period when the crisis extent was becoming more visible. Secondly, post GFC, the hit rates of IMF forecasts have deteriorated even more than during the GFC. As Mody correctly points out, Fund's forecasts got progressively more and more detached from reality.

At this stage, looking at April and October 2018 forecasts from the Fund's WEO updates implies virtually zero credibility in the core IMF's thesis of a 'soft landing' for the global economy over 2019-2021 time horizon.