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For a change, the World Bank's projections for global growth has improved. MoneyShow's Jim Jubak discusses where this growth is expected to occur, and why it is important.
Those jolly folks at the World Bank have brought us a Christmas present. The present is a projection for global growth that's higher than the last prediction for global growth.
Most of this is coming from East Asia, and particularly from China. For East Asia, which includes China, the World Bank said growth is going to be about 7.5% in 2013, instead of 7.1% in its earlier forecast. For China in particular, 8.5% instead of 8.1%.
This is important because the World Bank is saying that about 40% of global growth in 2013 is going to come from East Asia, from countries like Thailand, Taiwan, Korea, China, etc. This is really the growth engine for 2013 and beyond. So the fact that the growth engine is speeding up is really, really good for the global economy.
What you can really see is sort of a world in which the growth ripples out from this area and hits commodity economies like Australia and Canada and Brazil. It hits economies that sell stuff to China, besides just commodities.
So this will help the Eurozone, because the Eurozone is China's biggest trading partner. It will help US companies that sell things like auto interiors, or like Johnson Controls (JCI) that sell any kind of industrial equipment to China. All those things will see a big upsurge for companies that sell into the Chinese consumer markets, such as Yum! Brands (YUM) or McDonald's (MCD) or Coach (COH). This is all good news because this is where the growth is coming from.
I think the more closely an economy is connected to the Chinese economy in terms of supply and demand, I think the more likely that they will get a bigger piece of the growth. So Brazil for example, which is a very big trading partner in the commodities area with China, will get a fairly good bump. So will Australia. This might in fact actually end the crisis in the Australian mining industry as Chinese growth picks up.
We're still talking about 8.5% as a projection, not the 10% that we're used to seeing at the top of the Chinese boom. This is a relatively healthy growth rate for China. It's not high enough to make people worry about it being unsustainable.
So we're moving off of the bottom. The bottom turned out to be somewhere around 7.5%, 7.4%, 7.1% in September, and we're accelerating, but it doesn't look like we're accelerating so fast that we then already got to start to worry about when this boom might end.
Right now, Happy Christmas, Merry Christmas, Happy New Year from the World Bank about global growth.