With GDP growth in China continuing to slow, the rest of the world is feeling the pain. The IMF revised its global GDP forecast down yet again to 3.2 percent. With the second-largest economy in the world continuing to slow and muted global growth expectations for other developed economies, it is not surprising that CEOs remain reluctant to invest significantly in their businesses.
Despite a confidence reading well above contraction levels, the quarter-over-quarter decline in fixed investment, from 59.2 to 57.8, is worrisome as the trend continues to be to the downside with last quarter's reading representing the sixth decline in the last seven quarters.
The slowdown in China, and many of the commodity exporting countries that it supports, contributed to a 4 percent decline in exports in the United States in 2015. China was also on the minds of investors at the beginning of the year, with sentiment remaining rather bleak. Despite some speculation that previously reported GDP numbers were artificially high, GDP growth for China came in at 6.7 percent, which was higher than many had expected.
Further discussion of currency devaluation also contributed to a reversal in the negative sentiment for the country as a weaker currency would lead to improved global demand and potentially stronger growth. Confidence in China rose 1.9 points for the quarter across participating CEOs, despite the concerns at the start of the year.
— By Christopher Moore, managing partner and chief investment officer, Massey Quick
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