Monday Musings: October 13, 2020

Oct 13, 2020


Public Trust Credit Team

The International Monetary Fund revises its 2020 global economic outlook upward

The International Monetary Fund (IMF) released its World Economic Outlook, October 2020 providing a revised update to its global GDP forecast for 2020. The IMF now projects global GDP to decline by 4.4% in 2020, less severe than the 4.9% decline initially projected in June. The group cites better-than-anticipated performance in advanced economies, a stable economic rebound in China, and indicators of a more robust recovery in the third quarter. Although the overall picture for global growth has improved, IMF Managing Director Kristalina Georgieva has stated that “the ascent will likely be long, uneven, and uncertain.” This sentiment remains as the IMF has positively revised expectations for more advanced economies while lowering its estimates for India and countries in Southeast Asia. The group now forecasts global GDP growth of 5.2% in 2021, attributing the improved global outlook to the massive fiscal and monetary responses from governments worldwide, but the group does anticipate further monetary and fiscal policy may be needed to ensure a stable and lasting recovery.

Despite the COVID-19 recession, China's trade continues a robust recovery

In September, China’s exports and imports increased by 9.9% and 13.2% respectively over the year prior, marking the sixth straight month of growth and signaling that the world’s second largest economy is seeing a strong recovery. The strong print was primarily due to the export of medical supplies and work-from-home items, as China has reaped the largest benefits from these trends (as have some U.S. technology companies). What matters for the U.S., however, is China’s increase in imports. Compared to a year prior, imports from the U.S. increased nearly 25% in September, driven by strengthening domestic demand in China and a step up from China in buying U.S. energy and agricultural imports required by the phase-one trade deal. The U.S./China trade deficit had already contracted by 6% in August over the year prior, and these figures suggest it likely contracted even more in September. The data shows the recovery in China is progressing well with economists expecting that China will return to 5%-6% GDP growth in Q3. However, trends highlighted in the data also show positive signs for the U.S. and its balance of trade with China.
All comments and discussion presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. The information presented should not be used in making any investment decisions. This material is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.

Similar Articles

Credit Musings: Quarterly Credit Update

In this quarterly report, the Credit Team provides their thoughts on corporate use of cash, the moderation in lending and some decline in consumer credit, the elevated correlation of debt and equities, and some data supporting one argument on inflation.

Credit Musings: August 8, 2022

This week, we share our thoughts on several shortcomings of the U.S. semi-conductor bill as well as analyze the July Senior Loan Officer Survey

Credit Musings: July 27, 2022

This week, we share our thoughts on the potential fallout of the United States’ involvement in Taiwan as well as the European Central Bank’s exit of their negative rate environment.

Stay in the loop

 Sign up to receive perspectives on markets, investment strategies, and economic outlook advice.