IMF Steady Growth Outlook Holds Warning for Miners

PortfolioDirect has been using the momentum of IMF global growth revisions as an important indicator of cyclical positioning for the resources sector. Without an acceleration in global growth, a cyclical recovery for the sector is unlikely. For the first time since 2010, the IMF has raised its forecasts – a positive sign - but only by 0.1 percentage point for 2016. The forecast for 2015 is unchanged. Among the advanced economies, upward revisions for growth in Europe and Japan have been offset by lower growth elsewhere. Among the emerging markets, large upward revisions for India are offset by cuts to forecasts for Russia, Latin America and Africa. A critical emerging issue has been a reassessment by the Fund of potential global growth - a negative for the resources sector - which it sees as having fallen in both advanced and emerging economies. Its starting point for growth in 2016 is lower than for any year other than 2010, as the chart of the Fund’s recent forecast history illustrates. The expected future acceleration is now very modest by historical standards.