Meritz Securities announced on the 11th that it is revising upward its growth rate forecasts for the US Gross Domestic Product (GDP) for this year and next year. On the other hand, it lowered its expectations for Europe and China.
Economist Lee Seung-hoon said, "The financial market's attention or hope seems to be solely focused on the Fed's 'big cut,'" adding, "Market participants appear to be insensitive to signals indicating a strong economy but react sensitively to even small signs suggesting economic slowdown or deterioration."
Previously, the market reacted sensitively to the September ISM Manufacturing Index. The August figure was 47.2, 0.3 points below the expected 47.5, but there was a strong reaction mainly in the stock market.
He stated, "The possibility of a significant slowdown in consumption growth has decreased in proportion to the slowdown in real wage growth in the US, and meanwhile, facility investment is likely to gradually recover," adding, "Considering this, we revise upward the US GDP growth rate forecasts (year-on-year) for this year and next year from 2.4% and 1.4% to 2.6% and 1.7%, respectively."
He further explained, "Although concerns are greatest, the country that is actually enduring well remains the US, and it is difficult to consider a big cut as the base scenario in this environment."
On the other hand, the economic outlook for Europe and China was lowered. In Europe’s case, the downward revision of the Q2 growth rate (due to negative consumption growth) and the recovery of consumption and service sectors were reflected. For China, the lack of private sector self-sustainability across industrial production, fixed investment, and retail sales, as well as passive policy responses, were judged to be problematic.
Economist Lee Seung-hoon said, "Europe’s forecasts for this year and next year are lowered from 0.8% and 1.5% to 0.7% and 1.1%, respectively," adding, "It should also be considered that, contrary to current market expectations, the institution that may need to implement aggressive rate cuts until next year might not be the US Federal Reserve (Fed) but the European Central Bank (ECB)."
He continued, "The Chinese economy is expected to slow from 5.0% in the first half of this year to 4.6% in the second half," adding, "The forecast should be lowered to 4.8%, the lower end of the growth target 'around 5.0%.'"
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