Growth concerns dominate

In the US, growth concerns have been centred on housing and yesterday's reports only reinforced those concerns. Reuters reports:

Housing starts tumbled 10.2 percent to a 1.191 million unit annual rate, the slowest since March 1993, the Commerce Department said on Wednesday. Economists had expected starts to slip, but the sharpness of the downturn took them by surprise...

Indeed, the Commerce Department said permits for future building fell 7.3 percent last month, the sharpest drop since January 1995, to an annual rate of 1.226 million, the lowest level since July 1993.

The Beige Book was not particularly optimistic either.

A survey of business contacts conducted by regional Federal Reserve banks to help prepare for the Oct. 31 interest-rate meeting found U.S. economic growth has slowed since August, with consumers pulling back a bit and housing falling further.

And inflation failed to moderate further in September.

The Labor Department said the Consumer Price Index, the most broadly used gauge of inflation, rose 0.3 percent last month, the biggest gain in four months. However, the core rate, which excludes energy and food, moved up a modest 0.2 percent...

In addition, oil prices hit a record $89 a barrel on Wednesday, increasing worries that inflation will move higher and hinder economic growth.

Weak US economic growth is having an impact on the IMF's assessment of global growth. From Bloomberg:

The IMF lowered its projection for the global expansion next year to 4.8 percent in its semiannual World Economic Outlook, from an estimate of 5.2 percent in July. A weaker outlook for the U.S. was mostly to blame, as the fund reduced its forecast to 1.9 percent, from 2.8 percent.

"I would emphasize that there are serious risks ahead," Simon Johnson, the IMF's chief economist, said at a press conference in Washington. "The smoke has not yet cleared" from the financial-market turmoil, he said.

"Robust" growth in China, India and Russia, which accounted for half the global expansion over the past year, will compensate for the American slowdown, the fund said in its report. The IMF's new prediction is still half a point faster than the average pace so far this decade.

But it is not just the US economy facing problems. Japan's economy appears to be slowing too, with its leading economic indicator falling to 27.3 in August from 72.7 in the previous month.