The world economy strode into 2014 with buoyant anticipation. Unfortunately, Q1 2014 did not live up to expectations. By mid-year, economic report cards across the world painted a mixed picture of poor economic recovery and sluggish growth.
The unhappy news is a grim prognosis for the world economy. Growth among Asian economies is expected to stay somewhat flat. The happy news, on the other hand, is a dramatic improvement in some key economic indices – that of the US job market and the Purchasing Managers Indexes across Asia in particular.
Emerging from 2013 with a discernibly strengthened performance, the world economy strode into 2014 with buoyant anticipation of further improvement. The optimism was fuelled by expectation of continued recovery in the advanced economies and reinvigorated growth in the emerging markets.
Unfortunately, the year did not start well for the world economy. The global economic performance in Q1 2014 did not quite live up to the hopeful expectation.  The world’s major economies largely floundered. The US economic recovery dipped. The Eurozone economic resurgence dithered. And growth among developing Asian economies remained generally sluggish.
Despite rallying efforts, things did not really get much better in the ensuing months.  By the halfway mark in June, economic report cards across the world painted a mixed picture. So, what’s up and what’s down for Asian economies going forward in the second half of 2014?
The unhappy news was a series of grim prognoses of sombre outlook for the world’s advanced economies. And growth among Asian economies would stay somewhat flat. The happy news, on the other hand, was dramatic improvement in some key economic indices – the US job market and the PMI’s (Purchasing Managers Indexes) across Asia in particular. 
World economy: Grim prognoses, gloomy outlook
Prognoses of the world economy for 2014 among global institutions and economic analysts appear decidedly grim and the economic outlook for the remaining months of the year, gloomy.
The World Bank’s latest Global Economic Prospects report released in June shaved down its global growth projection for 2014 as a whole to 2.8% from its earlier projection of 3.2% in January.
The International Monetary Fund (IMF) is another case in point. At a conference in France in early July, IMF chief Christine Largarde alluded to what she saw as less robust prospects than expected for the global economic momentum. “We are seeing global activity pick up, but the momentum could be less robust than expected because potential growth is weaker… [and] investment remains lacklustre,” she said.
The advanced economies, specifically those of the US and the EU, are the focus of attention right now. Whither they drift?  
The US economy plunged deeper than expected in Q1 2014. It shrank at the annualised rate of 2.9%, nearly three-fold deeper than the 1.0% contraction previously forecast. The downturn plunged the US economy to its worst performance in five years.
Needless to say, US consumer spending and exports during the period suffered.  Consumer spending, which typically accounts for more than two-thirds of US economic growth, increased by only 1.0% in the quarter – far short of the earlier estimate of a 3.1% increase. Exports slumped 8.9% versus an earlier projected decline of 6.0%.
Thankfully, the US economy managed to gain some traction in the second quarter. But is it sustainable over the second half of 2014? The US Federal Reserve is guarded in its outlook. In mid-June, the Fed revised its 2014 growth forecast down to between 2.1% and 2.3% from its March projection of 2.8%–3.0%. It also cut its projections for long-term interest rates from 4.0% down to 3.75% – a move that the Fed chair, Janet Yellen, had reportedly attributed to “a slight decline in projections for longer term growth”.
Over in Europe, the situation is also downcast. In a late June press release, the European Commission attested to subdued economic mood across Europe. Its Economic Sentiment Indicatorshowed that economic sentiment was down in the Eurozone area (dropping by 0.6 points to 102.0) and sentiment was just broadly stable in the EU (marginally declining 0.1 points at 106.4).
Slowdown but strong upside potential in Asia
Economists and financial analysts largely expect growth in the world’s developing economies to be flat in 2014 – marking the third consecutive year of a sub 5% growth. Asia’s developing economies would suffer the same predicament but they would post generally better numbers than the global average for developing markets and would lead in the world economy’s recovery.
The World Bank’s Global Economic Prospects report said, “Growth in China is expected to ease to 7.6% in 2014 and further to 7.5% in 2015 and 7.4% in 2016, reflecting the ongoing rebalancing of the economy.”
The big question across Asia is: How much of China’s sag in its economic growth would impact on the rest of Asia’s economies?
Not much, it seems. The World Bank report said, “Growth in East Asia has remained broadly unchanged despite a slowdown in China.”
In the July issue of its Pacific Economic Monitor,the Asian Development Bank said, “Growth in the People’s Republic of China is expected to ease…  Growth in the rest of developing Asia is expected to increase slightly on the back of the improving global economy. The newlyindustrialised economies of East Asia all expect higher growth in 2014 and 2015.”
Another key question and one that is close to the heart of Asian retailers is: What about consumption? Happily, the answer appears an affirmative one. The World Bank report said, “Regional consumption has proved to be resilient, with the notable exception of Thailand.”
On a brighter note
Consumption resilience would cheer Asian retailers – especially when the second half of the year is typically packed with busy year-end and holiday shopping.
There is more cheerful news…
Firstly, the US employment market appears to be making some dramatic improvements. In June, US employers added 288,000 jobs and helped cut the unemployment rate to 6.1% – the lowest since the economic downturn was unleashed in 2008.
Secondly, Purchasing Managers’ Indices (PMI’s) across Asia are picking up vigorously.  The PMI is one of the key indicators of economic health and strength. In June, Asian powerhouses China and Japan both recorded strong rise in their PMIs.
Source retailasiaonline.com