Wednesday, September 30, 2015
IMF head warns of weaker global growth; UK workers on minimum wage may double by 2020; 2015 turning terrible year for investors
1 IMF head warns of weaker growth (BBC) The head of the International Monetary Fund has warned global growth is likely to be weaker this year than last. Christine Lagarde also said she expected there would be only a modest acceleration in 2016. And she warned there could be an economic "vicious cycle" caused by higher US interest rates and the Chinese slowdown.
She said these threats could jeopardise recent economic gains in Asia, Latin America and Asia. She said: "The good news is that we are seeing a modest pickup in advanced economies. The moderate recovery is strengthening in the euro Area; Japan is returning to positive growth; and activity remains robust in the US and the UK as well.
"The not-so-good news is that emerging economies are likely to see their fifth consecutive year of declining rates of growth." She added: "On the economic front, there is ... reason to be concerned. The prospect of rising interest rates in the US and China's slowdown are contributing to uncertainty and higher market volatility.
She also pointed to the "sharp deceleration" in the growth of global trade and the "rapid drop" in commodity prices, which is damaging the finances of commodity-exporting emerging market economies.
2 UK workers on minimum wage may double by 2020 (Larry Elliott in The Guardian) The number of employees earning the minimum wage will double to more than 10% of the UK workforce by the end of this parliament, according to new research.
A study published by the Resolution Foundation, timed to coincide with the 20p an hour increase in the minimum wage, found that the decision by George Osborne to lift the statutory pay floor through a national living wage would result in a sharp increase in the numbers of people having their wages set by the state.
The Resolution Foundation said only one in 50 employees were being paid the minimum wage after it was set at a cautiously low level by Tony Blair’s government in 1999. In the years since, the number of workers earning the minimum wage has risen to one in 20, but is now set to increase to one in nine by 2020, or 3.2 million people.
Adam Corlett, the Resolution Foundation’s economic analyst, said: “Over a million workers will get a welcome pay rise today as a result of the latest increase in the minimum wage. “The new ambition shown by the chancellor is welcome. But it will mean that around one in seven private sector workers will have their pay directly set by government by 2020.”
3 2015 turning terrible year for investors (Wes Goodman in Sydney Morning Herald) For investors around the world, 2015 is turning into a year to forget. Stocks, commodities and currency funds are all in the red, and even the measly gains in bonds are being wiped out by what little inflation there is in the global economy.
Rounding out its steepest quarterly descent in four years, the MSCI All Country World Index of shares is down 6.6 per cent in 2015 including dividends. The Bloomberg Commodity Index has slumped 16 per cent, while a Parker Global Strategies index of currency funds dropped 1.8 per cent.
Fixed income has failed to offer much of a haven: Bank of America's global debt index gained just 1 per cent, less than the 2.5 per cent increase in world consumer prices shown in an International Monetary Fund index.
After three years in a virtuous cycle of rising share prices and unprecedented monetary easing, markets are now sinking as emerging economies from China to Brazil weaken and corporate profits slump. Analysts have cut their global growth estimates for 2015 to 3 per cent from 3.5 per cent at the start of the year, and the turmoil has added pressure on central banks to prolong their stimulus programs, with traders scaling back forecasts for a Federal Reserve interest-rate increase by year-end.
Investors suffered the brunt of this year's losses in the third quarter, with almost $11 trillion erased from stocks worldwide over the past three months. China has been the biggest source of anxiety for investors, after turmoil in the nation's financial markets fuelled concern that the country's worst economic slowdown since 1990 was deepening.