U.S. Debt Credit rating firms may also be discounting an improvement in U.S. debt levels, which have shrunk to a six-year low. Total indebtedness including that of federal and state governments and consumers has fallen to 3.29 times gross domestic product, the least since 2006, from a peak of 3.59 four years ago, according to data compiled by Bloomberg.
French debt maturing in a year or more rallied 7.8 percent since before S&P cut the sovereign rating to AA+ on Jan. 13, more than double the gains for the global government bond market, according to Bank of America Merrill Lynch indexes.
Pimco forecasts global growth of 1.75 percent in the year through September 2013, weighed down by a euro-zone recession and a slowing pace of expansion in China.
It’s a pretty dismal world growth outlook. It will be difficult to return to former levels of growth in many of the world’s biggest economies because of the levels of debt, structural changes in the labor market and slower growth in the working-age population.
Those changes mean that a 2 percent expansion in the U.S. may in the future be seen as good growth, not the 3 percent that investors have been used to.
It is difficult to see China’s growth continuing at a 7 percent pace, considering demographic changes and the challenge of maintaining expansion as the economy moves to a domestic consumption model from one based on exports.
China’s economy expanded 7.4 percent in the three months ended Sept. 30 from a year earlier, slowing for a seventh quarter, the National Bureau of Statistics said today.
Sheila McKinney
