Wall Street might have found its footing after a miserable start to the year, but don’t get too cozy.
The International Monetary Fund raised a warning flag with its latest World Economic Outlook update, which cut its projection for global economic growth this year to 3.2 percent. That’s down from the 3.4 percent seen in January and on part with the pace of expansion seen last year.
In his forward to the outlook, IMF economic counselor Maurice Obstfeld said, “Global recovery continues, but at an ever-slowing and increasingly fragile pace.”
There have been a few positives lately. Swooning oil prices have recovered some and investors who have been pulling money out of China have slowed their withdrawals.
But Obstfeld painted a picture of a global economy that’s navigating perilous waters with extreme flooding and drought worsening poverty, Britain contemplating an exit of the European Union and fear of terrorism looming.
China, an engine of economic growth for so long, is now seen as somewhat shaky as it enters into its next phase.
“China, now the world’s largest economy on a purchasing-power-parity basis, is navigating a momentous but complex transition toward more sustainable growth based on consumption and services,” he said. “Given China’s important role in global trade, bumps along the way could have substantial spillover effects.”
The politicians could also feed into the difficulties already facing the economy.
“In both the United States and Europe, the political discussion is turning increasingly inward,” Obstfeld said. “The causes are complex but certainly reflect growing income inequality as well as structural shifts, some connected with globalization, that are seen as having favored economic elites while leaving others behind.”
Additionally, noted that sustained slow growth and continued cuts to the outlook carry the risk of a world economy reaches “stalling speed and falls into widespread secular stagnation.”
Trying to sound at least something of a positive note, he also noted that countries could enact tax reform, invest in infrastructure and coordinate efforts to combat stagnation.
All of this comes at a delicate time for retail, when companies are courting a more connected consumer and technology is causing major disruption.
There is an increasingly acknowledgement, though, that the old tricks aren’t working as well and that merchants need to be nimble to move forward.