It’s happening again.
The International Monetary Fund released its forecast of global growth on Tuesday, cutting its estimate for the third time this year to 3.1 percent for 2015. That’s down 0.2 percentage points from its July forecast and 0.4 percentage points from April. Unfortunately, this story is starting to feel familiar.
The obvious culprit is the faster-than-expected slowdown in China that has sent the price of commodities plunging, wreaking havoc on countries such as Brazil that supply it with raw materials such as iron ore and soybeans. But perhaps even more worrying is that the IMF points to a broader array of headwinds ranging from demographic changes to high public and private debt to monetary policy as underlying factors behind the global slump.
In other words, don’t hold your breath for faster growth.
“Six years after the world economy emerged from its broadest and deepest postwar recession, a return to robust and synchronized global expansion remains elusive,” wrote Maurice Obstfeld, the IMF’s chief economist.
The IMF released its gloomier projections ahead of its annual meetings that are being held Peru but are expected to be dominated by questions about China. The downgrade was no surprise: Managing Director Christine Lagarde warned that the numbers would be weaker in a speech in Washington last week, citing heightened uncertainty and financial market volatility.
There are signs the global malaise is beginning to infect the American economy as well. Job losses in manufacturing and mining weighed on U.S. job creation last month, with hiring falling well short of analysts’ expectations. In addition, the government lowered its estimate of job growth in July and August as well, suggesting the disappointing numbers in September are part of a trend rather than an anomaly.
This is not the first time that economic green shoots have withered. The Federal Reserve has repeatedly prolonged its commitment to supporting the U.S. economy as the recovery proved anemic. Now, officials expect to begin withdrawing its stimulus by the end of the year based on forecasts that show faster growth and falling unemployment.
Investors aren’t buying it: Odds of the Fed moving to raise its target interest rate for the first time don’t hit 50 percent until March 2016, according to futures markets.
After the goal post has been moved so many times, perhaps what would be most surprising of all is if the recovery that the world is hoping for finally materializes.