The IMF’s update of its global economic outlook to be released later this month will be “very slightly different” from the forecasts published in April, Christine Lagard said on the weekend. It’s a clear hint that the forecast will be cut, likely on US weakness.
The other factor is lagging investment, something we have repeatedly highlighted. Largard asked governments (especially in Europe) to spend more but pointed to companies as well.
“We see an investment deficit everywhere,” Lagarde said.
All the economic models foresee a certain amount of investment spending based on growth rates but those models are breaking down because investment spending just hasn’t appeared. Part of the new normal will be preparing for that (and trading it).
