Fitch: Global Growth Recovery In Place

Everything’s going to be okay, Fitch Ratings said on Tuesday. The global economic recovery story is intact, a populist anti-euro politician was defeated in France, China hasn’t crashed landed, and the United States job market is powering ahead. It’s an overall happy story for investors. Fitch’s Global Economic Update report noted that the first quarter lackluster growth numbers out of the U.S. can be explained by household consumption (Barclays blamed energy a couple of weeks ago). Fitch said the consumption shortfall “looks to have been affected by temporary factors.” Falling unemployment, wealth gains, improved consumer confidence and the prospect of income tax cuts should support a recovery this quarter. Some investors say that this has helped retail stocks recently, even as negative headlines prevail. Walmart (WMT 60,87 -0,58 -0,94%) is up 5.5% over the last month; Target (TGT 155,29 +2,37 +1,55%) is up 9.5%. Even Macy’s (M 20,12 -0,23 -1,13%) is up 1.3%, roughly in line with the S&P 500. In China, the impact of earlier policy stimulus has proved “more powerful than anticipated and the slowdown in the housing market has taken longer to materialize,” said Brian Coulton, Fitch’s Chief Economist. Europe, led by Germany and the U.K., is hanging on and doing better than expected. The region posted its eighth consecutive quarter of steady growth at an annual pace of 1.5%-2%, meaning it is growing as much as the U.S. “Accommodative monetary policies are gaining traction in the eurozone,” Coulton said. Though the euro zone remains a lopsided economy, with Germany taking the lion’s share of gains. Italy and France remain problematic. Spain is doing well and the U.K. has surprised everyone by not falling into the Atlantic because of Brexit. Fitch expects world growth to rise to 2.9% in 2017 from 2.5% in 2016 and has slightly revised up its 2018 forecast to 3.1% from 3.0% in March. The US growth forecast for 2017 has been revised down slightly but this has been offset by a better outlook for China and Japan.