The Week in Review: Global Growth Slashed, U.S. Indicators Weak

Global growth expects to slow in 2015 while the U.S. is seeing a rise in unemployment claims and disappointing indicators from the retail industry and small businesses market wide.

Global growth expects to slow in 2015 while the U.S. is seeing a rise in unemployment claims and disappointing indicators from the retail industry and small businesses market wide.

Earlier this week the World Bank cut its growth forecasts for many Asian economies, dragging the global growth rate even further despite previous expectations of a robust and accelerating economic improvement. In total, the World Bank sees 6.7% growth in Asia, while China will see 7.1% in 2015. While still above the nation’s target, some analysts believe even that target is too optimistic. The World Bank report noted corruption, worsening pollution, and large levels of “local government debt” and “shadow banking” were headwinds to sustained growth.

“Continued measures to contain local government debt, contain shadow banking, reduce excess capacity, curb energy demand, and control pollution will reduce investment and manufacturing growth,” the report said, adding that lower energy costs were not helping Asia’s growth rates as many analysts had previously expected.

Weak U.S. Indicators

In the U.S., a slew of reports this week all indicated worsening economic conditions as growth continued to decelerate in the world’s largest economy.

Retail sales, once expected to boom in early 2015 thanks to low energy costs, saw only a 0.9% rise in March, below 1.1% estimates, after retail sales fell in February by 0.6%. Retail and food service sales rose 4.3% on a year-over-year basis, but GDP growth was sharply negative in the first quarter of 2014, providing easy comps that should have caused the growth rate to be substantially higher.

With poor retail sales, small businesses are signaling growing pessimism. According to the NFIB, small business optimism fell, with all 01 components of the Small Business Optimism Index falling in what the group called a “rare occurrence.”

“Continued measures to contain local government debt, contain shadow banking, reduce excess capacity, curb energy demand, and control pollution will reduce investment and manufacturing growth,” said NFIB Chief Economist Bill Bunkelberg.

On top of weak retail sales and declining expectations from small businesses, Americans are likelier to lose their jobs. According to the Department of Labor, weekly initial unemployment claims rose to 294,000, up from 282,000 the week prior. While substantially lower than the post-recession peak in 2009, economists had expected the rate of claims to continue to fall in 2015, but have risen slightly from the bottom seen in December 2014.

Some economists believe wage gains are likely to come if the labor market continues to strengthen, which was a prediction for early 2015. The reality of slightly rising unemployment claims could indicate that those income gains are unlikely to materialize at scale throughout the United States.