The global economy could be headed for a “perfect storm” from which few nations will be able to emerge unscathed, a leading figure in one the world’s major economic institutions has predicted.
International monetary fund chief economist Simon Johnson says forecasts of economic growth in the US and Europe are “too optimistic” and will be hit hard by the sub-prime driven housing crisis at the same time as oil prices are at near record highs.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
“The combination of the global credit crunch and high oil prices could bring a big reduction in international trade from which no one would be immune,” Johnson says.
The warning comes as new data shows consumer confidence in the US continues to head towards the basement. The Conference Board Consumer Confidence index result of 87.2 in November – down from 95.2 the previous month – is the lowest it has been since the Hurricane Katrina disaster in 2005.
US consumers’ pessimism about the future of the US economy also increased, with the index dropping from 80 to 68.7 points.
In Australia, new capital expenditure decrease by 6.5% seasonally adjusted in the September 2007 quarter. The result is slightly below market expectations, but, according to ANZ economist Mark Rodrigues, capital expenditure levels remain reasonably strong thanks to two previous quarters of strong growth.
On the markets, the S&P/ASX200 has shaken off its funk of the past few days to be 6470.2, up 1.6% on yesterday’s close. The Australian dollar is trading at US88.42c, up on yesterday’s US87.57c close.