IMF warns global economy will get much tougher

<p>Kia ora,</p><p>Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news the IMF is warning the worst of the current economic turmoil is yet to come.</p><p>However first in the US, <a href="https://www.redbookresearch.com/" target="_blank"><strong>retail sales</strong></a> last week on a same store basis fell away noticeably from the same week a year ago. Inflation can barely explain the 'growth' in this latest survey.</p><p>But American <a href="https://www.newyorkfed.org/newsevents/news/research/2022/20221011" target="_blank"><strong>consumer inflation expectations</strong></a> for the year ahead moderated again for a third consecutive month, now at 5.4% in September, the lowest in a year, and down from 5.7% in August. The long-run average inflation expectation is 3% so there is still a long way to go to get these down from elevated levels, but five-year-ahead expectations are only 2.2% pa. Their median home price growth expectations declined marginally to just 2%, its lowest reading since June 2020. And expectations for the cost of medical care is also seen slowing but to a still-high 9.2%. On the other hand, consumers expect prices to rise faster for petrol.</p><p>US central bank policies do seem to be working on getting these expectations reset. But consumers <a href="https://news.gallup.com/poll/402464/government-agency-ratings-cia-fbi-federal-reserve-down.aspx" target="_blank"><strong>remain unhappy</strong></a> with them (which is par for the course). Nobody likes their medicine, even when it seems to be working.</p><p>In China, their <a href="http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4679610/index.html" target="_blank"><strong>September data</strong></a> shows they pumped out a lot of bank debt to support their economy, in fact twice as much as analysts were expecting and a new record high. This comes as authorities are su