Wondering what’s going on the World right now?  Markets are tanking, savings are surging and we’re all too frightened to spend!  Is there any silver lining??
Below is BT Chief Economist Chris Caton’s reaction to the current market volatility:
 Markets are selling off around the world because of global growth fears.
 In recent days, the US has had a disappointing Q2 GDP report, a disappointing manufacturing purchasing managers’ survey (the ISM) and news that real consumer spending fell for three months in a row through to June. Together, these suggest that the loss of momentum of the US economy has been worse than thought earlier.
Oddly, there was no poor economic news on Thursday, but markets are also spooked by rising debt concerns in Italy and Spain, and actions by the ECB and the Bank of Japan that convinced investors that things must be worse than they thought.
I see these fears as overdone; much of the slowdown in the US seems to be due to higher oil prices (which have since come off) and disruptions to manufacturing because of the supply-chain effects of the tsunami. That economy is not about to burst from the blocks, but it should resume moderate growth.
There is a key data release this evening: the July employment report. This is the most important single piece of economic news, and if it’s bad look out. On the other hand, I actually see more chance of a positive surprise, so it could be a good night.
The fall in the Australian market today, and in the currency, has nothing to do with the state of the Australian economy and everything to do with these overseas concerns. It will, however, further damage consumer sentiment. The good news: a further interest rate increase is now off the agenda.