IMF Slashes US GDP Growth Outlook: Now Sees US Growing Only 1.6% In 2016

Tyler Durden's picture

Having observed consensus economic growth expectations for the US tumble month after month, in its latest World Economic Outlook, the IMF decided to once again play catch down from its over-optimistic +2.2% outlook in July to just 1.6% now  which still remains above consensus expectations of just 1.5% growth in 2016, pouring cold water on Obama's strategy to paint the economy as growing strongly. 

Still - that doesn't matter - stocks are near record highs.


For 2016, the new World Economic Outlook sees 1.6% GDP growth in the U.S., which is down from 2.2% in the July update. Next year's forecast saw a 0.3 percentage point drop from July to 2.2% GDP growth. This compares to the Federal Reserve's estimates of GDP growth of 1.8% and 2.0% in 2016 and 2017, respectively, MNI reports..

Consumption growth in the U.S. "has remained strong, supported by a firm labor market and expanding payrolls," the report said, "but continued weakness in nonresidential investment together with a sizable drawdown of inventories has weighed on the headline growth number."

The weakness in capital spending "reflects in part still-negative energy investment, dollar appreciation, financial turbulence earlier in the year, and heightened policy uncertainty related to the electoral cycle," the report said.

In 2017, growth is expected to pick up "as the drag from lower energy prices and past appreciation of the U.S. dollar fades," it said. Further out, medium-term potential growth, projected at 1.8%, "is held down by an aging population and a continuation of the recent trend of low total factor productivity growth."

Perhaps even more important than the collapse in the US GDP estimate, was the sharp drop in global trade volume, which the IMF now sees rising just 2.3%, down 0.4% from July's 2.7% forecast, and well below the IMF's 2016 global GDP forecast of 3.1%.

The latest global outlook is summarized in the following table:

Away from the US, the International Monetary Fund kept its forecast for global growth this year and next the same as in its July update, even as Brexit and slower-than-expected growth in the U.S. pulls down expected growth in advanced economies.

The IMF, in the World Economic Outlook released Tuesday, also warns monetary policy is expected to stay accommodative for some time, with advanced economies tightening more slowly than it has expected in April.

The World Economic Outlook forecasts the global economy will grow 3.1% this year, the same as it was in the July update. Meanwhile, the growth forecast for 2017 is 3.4%, also the same as in July.

While unchanged from July, the IMF sees a "more subdued outlook for advanced economies following the June U.K. vote in favor of leaving the European Union (Brexit) and weaker-than-expected growth in the United States," the report said. As a result, the 2016 growth forecast for advanced economies has been marked down to 1.6%, from 1.8% in July

These developments "have put further downward pressure on global interest rates, as monetary policy is now expected to remain accommodative for longer," the report said.

Most of the decline was due to a significant downgrade to the U.S. economic forecast. "The U.S. economy has lost momentum over the past few quarters, and the expectation of a pickup in the second quarter of 2016 has not been realized," the report said.

Which probably does not explain why both November and December rate hike odds are rising today.

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ANestIOS's picture

yeah but why for WTI too?

(in sympathy so sell WTI!)

StackShinyStuff's picture

I moonlight as a Bloomberg/CNBC headline writer.  I will tell you at the end of the day whether this was bullish or bearish.

Id fight Gandhi's picture

Wti is rigged. No real demand moves it. Just stories made up.

Offthebeach's picture

Green shoots of parasitic fungi on the cadaver of an economy.

( pro tip. You'll never forget the smell of gangrene )


Forward American Soviets!

Herdee's picture

The IMF track record is garbage. 

LawsofPhysics's picture

Bad news is good news?

CPL's picture

It's tuesday's news.  Weds news might be different but I'll hazard a guess that it's more of the same. 

Evil Peanut's picture

The gdp growth can be entirely attributed to the sales of weaponry to Saudi Arabia and Israel

venturen's picture

and the expectation of the FED raising rates go up....BBBBBAAAAAAWWWWWHHHHHHHH

coast's picture

the day they raise rates is the day I support hillary clinton, give bill a bj, (and not even save the sperm),  clmb mount everest, turn water into wine, raise lazurus from the dead, obama will tell the truth, hell will freeze over, the sun wont move and the moon wont shine,  hillary will look attractive, and dick cheney will find Jesus :-)  I have more but you get the point.

coast's picture

Let me take you down, cause I'm going...... to Strawberry Fields
Nothing is real....... and nothing to get hung about
Strawberry Fields forever

Seasmoke's picture

Raise those rates Mr. Yellen.  Still plenty of time for those 4 rate hikes promised for 2016. 

King Tut's picture
King Tut (not verified) Seasmoke Oct 4, 2016 8:29 AM

don't worry- she'll raise a quarter point each week for the whole month of Dec/s

Arkadaba's picture

And Britain will be the fastest growing economy in the G7 - so much for all those msm articles predicting economic doom if the leave side won.

King Tut's picture
King Tut (not verified) Arkadaba Oct 4, 2016 8:31 AM

what does England even produce?

King Tut's picture
King Tut (not verified) ANestIOS Oct 4, 2016 8:38 AM


NoDebt's picture

Muslim rape gangs and financial corruption are what's listed as 1 and 2 on Economywatch.


zippedydoodah's picture

Use Google to find out. Then learn what "England" is.

Billy Shears's picture

ZH's naivete surprises me at times, perhaps they forgot the /sarc tag. Rates hike odds are rising precisely because ANOTHER excuse is in the works for NOT hiking in November or December or whatever other month this fictitious event is supposed to take place; this IS the manipulation of gold pure and simple, FIAT IS SHIT, savings and other money market rates tell you so.

LawsofPhysics's picture

Yes, so precisely when is the real market going to force the fiat dam to break?

40+ years since money creation was detached from anything real and here we are...

Offthebeach's picture

Your back is real. So long as tax sheeple keep taking it up the ass peacefully, they'll keep loading it up.

Billy Shears's picture

IMF, WorldBank, are these institutions even credible? Why should anyone place any trust in these forecasts? Seems like these numbers are guesses at best and, at worst, fabrications to serve financial and government interests purely for the sake of control, propaganda and manipulation to name but a few.

aliens is here's picture

Obama will say IMF is peddling fiction.

PleasedToMeatYou's picture

Wow, gold's really squealin' like a peeeeig this morning. 

Down $25, whoo!  

Bay Area Guy's picture

Yeah, 1.6%.  If that were to actually happen as REAL economic growth, i.e., growth greater than the rat of inflation, I would actually be impressed.  If you look at Shadowstats, we haven't been positive in real economic growth since 2001, save for a single quarter blip in 2004.


King Tut's picture
King Tut (not verified) Bay Area Guy Oct 4, 2016 9:00 AM

"rat of inflation"- you got that right

Offthebeach's picture

Rough numbers

Say, GDP===2.0
Fiat printing inflation==3.0
1.0% decrease in wealth/yr.
10% decrease every decade.

However this isn't evenly distributed.

The 1%--top 10% are educated superbly, or hooked in crony rent seekers or via uniparty they shape the economy to their skill set. To the detriment of the poorly educated, non fitting to this economy like no/low skilled labor, non influential small businesses.

Of the not too great growth, most goes/captured by the 1-10%. That means low/non/negitive growth is ballanced by the bottom.

However it gets worse. The welfare/Medicaid FSA is kind of on the sideline, or taken out in my view, leaving the lower/working/ middle class to take the hit for this economy. I think this is well shown nown. And has been since Perot ( remember him?)

So, for 50 years, at least, we have seen once econmic and wealth making powerhouses like Detroit, Newark, upper Hudson, the rust belt cities go from wealth producers to tax eaters, if not now poverty producers. This phenomenon is now metastasized into state size turmors. New York, Illinois, California. Where once the cities became parasitic on state money, pulling the state government down, now states, half anyways, are pulling down a all to obliging Fedgov.

Batman11's picture

Step 1 - understand the nature of the beast - capitalism itself. 

Capitalism is in crisis for a very good reason, we don’t understand it.

Today’s ideal is small state, raw capitalism, which is actually how capitalism started, and we chose to ignore the work of the Classical Economists that studied it first hand in the past.

They realised capitalism has two sides, the productive side, where “earned” income is generated and the unproductive, parasitic, rentier side where “unearned” income is generated.

Today’s neoclassical economics is missing this distinction and everyone is going for the easy money in the unproductive side of capitalism.

The UK now dreams of giving up work and living off the “unearned” income from a BTL portfolio, extracting the “earned” income of generation rent.

The UK dream is to be like the idle rich, rentier, living off “unearned” income and doing nothing productive.

Adam Smith:

“The Labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money. But every savage has the full fruits of his own labours; there are no landlords, no usurers and no tax gatherers.”

Capitalism incorporates a welfare state for the idle rich and we can see our Aristocracy living in luxury and leisure off “unearned” income today.

In our ignorance of the reality of small state, raw capitalism, we have been busy promoting the unproductive side of capitalism to the masses by encouraging the BTL investor.

When you encourage too many people into the unproductive side of capitalism they are going to bleed it dry.

Adam Smith would think we are on the road to ruin:

"But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin."

Exactly the opposite of today's thinking, what does he mean?

When rates of profit are high, capitalism is cannibalising itself by:

1) Not engaging in long term investment for the future

2) Paying insufficient wages to maintain demand for its products and services

In the 18th Century they would have understood today’s problems with growth and demand.

Having forgotten the work of the Classical Economists, we set today’s goal as maximising profit which actually undermines, and eventually destroys, capitalism itself.

Amazon didn’t pay out profits as dividends and re-invested them, look how big it’s grown.

Just imagine if all companies were doing that.

We have undermined, and are destroying capitalism itself, because we didn’t understand it.

Small state, raw capitalism existed before and we should have taken on board the lessons the economists learnt at the time when they studied it from firsthand experience.


Batman11's picture

The Classical Economists always expected the bankers to get behind the productive side of capitalism.

Everyone has now forgotten the two sides of capitalism and about 80% of lending goes into real estate, inflating the cost of living with high mortgage payments and rent.

This in turn raises the minimum wage, making Western labour uncompetitive in international markets. It also reduces the purchasing power within the economy, reducing demand for products and services.

The US has probably been the most successful in making its labour force internationally uncompetitive with soaring costs of housing, healthcare and student loan repayments.

These all have to be covered by wages and US businesses are now squealing about the high minimum wage.

All known and seen over two hundred years ago in the first round of small state, raw capitalism.

(In those days it was just high rents, but the effect is the same).


When you understand Capitalism you know how to harness the power of its productive side and utilize its unproductive, parasitic side as the source of taxation. 

You tax “unearned” income to subsidise the productive side of capitalism with:

1) Low cost housing

2) Free or subsidised education

3) Free or subsidised healthcare

4) Free or subsidised services

All these services reduce the cost of living and the minimum wage making business and industry internationally competitive.

There should be little or no tax on “earned” income (income tax).

It’s good for business and works in a globalised world unlike today’s nonsense think.

Classical Economics is only the enemy of rentiers (those who want their money with no effort), who went to great lengths to hide it at the end of the 19th Century and the beginning of the 20th Century.

With little knowledge of the Classical Economists, Milton Freidman came to all the wrong conclusions.

Michael Hudson "Killing the Host" for more details.

Offthebeach's picture

The poor(ish) vote the politician, the rent seekers buy the politician. The politician delivers the ever smaller number of producers to the slaughterhouse.

Infield_Fly's picture
Infield_Fly (not verified) Oct 4, 2016 10:49 AM

US GDP is negative and has been for years.


That marxist chocolate in the WH has used his "shit care" program to drive up costs and create fake growth.



redc1c4's picture

i figured it was a typo, and they meant to write 0.16...

what growth?

ExpertiseAsia's picture

This obviously does not bode well for trade. South Korea's September trade numbers were a diappointemnt again, and another harbinger of things to come? Read up more here.