Why world growth will bring market woes
The world's economic and financial leaders at this month's IMF/World Bank meeting will preside over a strengthening global economy. Real GDP will be stronger next year than this. But the reasons differ by region.
Japan's economic recovery is being driven by massive wage growth (which I measure by combining new jobs and pay increases) and super-easy monetary conditions (judged by interest rates and the exchange rate), but is being hindered by restrictive fiscal policy.
The US has enough consumer wealth and jobs to keep its economy on the boil, and the Fed has remained neutral on interest rate policy - up to now. Europe has super-easy monetary conditions but little else, and its core is the most dicey recovery candidate. But outside the core, most European countries are booming. And I reckon that export-led recovery in the core (about the only sign of life at the moment) will spill over into domestic demand growth gradually.
Elsewhere, Latin America looks set to maintain strong real GDP growth. East Asia will remain sub-par by its historical standards, but is probably at the bottom of its cycle now. Emerging Europe is at the top of its cycle, but will slow only a little.