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<ul class="summary-list"><li>Analysts are increasingly recommending defensive stocks to blunt the impact of an economic slowdown.</li><li>Among defensive sectors, consumer staples have risen sharply recently. </li></ul>Amid fears of a recession and increased market volatility, analysts have been pointing to defensive stocks as a safe bet to hedge macro risk.Among defensive sectors — which include things like real estate and financials — investors recently have been pouring into consumer staples in particular.The S&amp;P 500's consumer staples sector has risen roughly 4.1% in the last month, handily outpacing the S&amp;P 500, which is up just over 1% in that time.Retailers like Walmart and Target have skyrocketed 9.2% and 5.7% respectively in the last month, while consumer goods producers like Clorox and Coca-Cola are up 11.2% and 4.5%."The US consumer is reacting to the softer labor market, exhausted pandemic savings, and high interest rates. Signs of this reaction are visible across many angles, including the degree of outperformance in staples versus discretionary stocks," Bank of America strategists said in a note earlier this month.Defensive stocks historically do well in times of economic uncertainty, which has led to <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/safe-defensive-stocks-ai-investing-rally-nvidia-semiconductors-selloff-outlook-2024-9">a growing chorus of analysts </a>recommending investors take positions in more "boring" companies, and resist the allure of high-flying bets on things like artificial intelligence."Lately, the market has skewed much more defensively as it has worried more about growth and less about high inflation or rates," Morgan Stanley's chief US equity strategist Mike Wilson said in a Monday note."Since the spring, the relative performance of defensives over cyclicals has been the strongest since the last recession ended," he added.Last week, Wilson said investors should <a target="_blank" href="https://markets.businessinsider.com/news/stocks/ai-stocks-overcooked-nvidia-seminconductors-morgan-stanley-mike-wilson-2024-9?_gl=1*1uze75i*_ga*MTY3OTgyNjg0MS4xNzIxMDE2MDM2*_ga_E21CV80ZCZ*MTcyNjU3MzcyNC4xNDcuMS4xNzI2NTc4MTEzLjUwLjAuMA..">reallocate AI investments</a> toward quality defensive stocks, including staples.That redirection could broaden a market rally that's been largely driven by tech stocks this year. The S&amp;P Global Semiconductor Index is down 6.26% for the month, with the tech sector seeing outflows of $2.97 billion in the last two weeks, according to LSEG Lipper data cite by The Financial Times. Consumer staples, meanwhile, have seen $1.43 billion of inflows in the same time period.This week, Bank of America equity strategy chief Savita Subramanian <a target="_blank" href="https://www.businessinsider.com/safe-dividends-bank-america-strategy-chief-savita-subramanian-federal-reserve-2024-9">similarly advocated for defensive stocks</a>."I know this is the most boring call of all time, but sometimes boring is good," Subramanian said in a Bloomberg interview on Monday.With the Federal Reserve likely to finally cut rates at its meeting this week, defensive stocks could be poised for further growth."Defensives tend to outperform cyclicals fairly persistently both before and after the cut," Wilson said.

Investors are pouring into this defensive corner of the stock market amid fears of an economic slowdown

<ul class="summary-list"><li>The US economy looks strong, judging by GDP growth, profits, productivity, and the labor market.</li><li>JPMorgan Asset Management is upbeat heading into 2025, but a major risk looms.</li></ul>It looks like the most obvious threats to the economy have been neutralized for now, but a veteran strategy chief fears that an under-the-radar risk poses a threat to the global expansion.This economic backdrop bears little resemblance to the <a target="_blank" href="https://www.businessinsider.com/us-economy-stagflation-disaster-high-prices-inflation-high-unemployment-2022-3">so-called stagflationary environment</a> of 2022, a year where <a target="_blank" href="https://www.statista.com/statistics/188185/percent-change-from-preceding-period-in-real-gdp-in-the-us/">US GDP shrank in the first two quarters</a> as <a target="_blank" href="https://www.businessinsider.com/inflation-cpi-price-growth-june-2022-7">inflation hit multi-decade highs</a>.Fast forward to late 2024, and GDP has grown by at least 3% for <a target="_blank" href="https://www.bea.gov/data/gdp/gross-domestic-product">three of the last four quarters</a> and is expected to do so again in the third quarter, according to JPMorgan Asset Management. The firm estimates that consumer spending, which <a target="_blank" href="https://fred.stlouisfed.org/series/DPCERE1Q156NBEA">accounts for about two thirds of US GDP</a>, also likely accelerated to 3.5% on an inflation-adjusted basis last quarter, up from 2.8% in Q2.Meanwhile, price growth is <a target="_blank" href="https://www.businessinsider.com/inflation-september-cpi-consumer-price-index-federal-reserve-interest-rates-2024-10">remarkably close to the Federal Reserve's 2% target</a>, which allowed the US central bank to <a target="_blank" href="https://www.businessinsider.com/fed-cuts-interest-rates-how-much-september-fomc-powell-inflation-2024-9">start the interest rate easing cycle with a bang</a> in mid-September.Perhaps most encouraging is that the labor market appears to be healthy. <a target="_blank" href="https://www.businessinsider.com/september-jobs-report-unemployment-rate-nonfarm-payroll-growth-federal-reserve-2024-10">Job additions easily exceeded estimates</a> in September, and the unemployment rate is <a target="_blank" href="https://www.bls.gov/news.release/pdf/empsit.pdf">in check at 4.1%</a>.Corporate earnings growth, productivity growth, and business fixed investment all seem to be headed in the right direction as well. The same is true of wage growth, which JPMAM found has topped inflation for the last 17 months, underpinning solid consumer spending in the process.These signals have given David Kelly, JPMAM's chief global market strategist, great confidence.The economic outlook "seems remarkably benign with solid economic growth, low unemployment, resilient profits, a slow drift down in inflation, and gradual easing from the Federal Reserve," Kelly said in written commentary on October 28. The market veteran added that there aren't "signs of an imminent change in the economy's path."<h2 id="59ff7859-06ea-46e1-a918-af568c5cb476">A 'tariff'ying risk</h2>That seemingly picturesque backdrop helps explain why the S&amp;P 500 has risen 22% this year and is near record highs. But Kelly believes investors can't let their guards down."Investing has always been as much about risk as about return, and the key to long-term success is being prepared for both," Kelly said in his commentary.Kelly said to be wary of elevated stock valuations — which he and his colleagues at JPMAM <a target="_blank" href="https://www.businessinsider.com/investing-strategy-real-estate-stocks-bonds-portfolio-jpmorgan-asset-management-2024-10">said last week</a> could put a lid on future returns — and the market's heavy tilt toward mega-cap growth companies, even though <a target="_blank" href="https://www.businessinsider.com/cheap-stocks-to-buy-strong-growth-market-outlook-garp-bmo-2024-10">that has been changing</a> in recent months.However, neither of those overhangs is more serious than the potential fallout from a domestic or international political shock. When asked last week about the biggest risk to his long-term outlook, Kelly quickly arrived at an answer: a fierce global trade war marked by escalating tariffs."No matter which set of economists you have sitting here, every one of 'em will tell you that tariffs are not a good idea," Kelly said at JPMAM's <a target="_blank" href="https://www.businessinsider.com/investing-strategy-real-estate-stocks-bonds-portfolio-jpmorgan-asset-management-2024-10">annual long-term capital market assumptions conference</a> on October 21. "You can use it as a threat, though it's kind of like a nuclear threat — the whole point is, if you actually end up using it, you kind of screwed up somewhere."Economists usually disapprove of tariffs, which are taxes on foreign imports, in most cases. Tariffs promise to generate revenue for the home country while aiding domestic industries, but they can drive up consumer prices and prompt counter-tariffs that lead to trade wars.In a worst-case scenario, tariffs would result in higher prices and lower growth due to the waste and inefficiency that they create while hurting importers and exporters in both countries."A trade war could cause us to push up our inflation forecast and push out our growth forecast at the same time," Kelly said at the conference.While Democrats and Republican presidents have leaned on tariffs in the past, it's former President Donald Trump who's <a target="_blank" href="https://thehill.com/business/4945577-trump-tariffs-economy-trade/">promising to implement substantial tariffs</a> in this election cycle.While some say the threat of aggressive tariffs would help the US secure better trade terms, others are skeptical — if not outright scared.Such tariffs <a target="_blank" href="https://www.businessinsider.com/election-trump-harris-economy-inflation-stock-market-volatility-risk-orlik-2024-10">would cause "seismic shocks to the US economy,"</a> Tom Orlik, the chief economist at Bloomberg Economics, said earlier this month. Charles Schwab global investment strategy chief Jeffrey Kleintop <a target="_blank" href="https://www.businessinsider.com/how-to-invest-stock-market-international-investing-strategy-charles-schwab-2024-6">cited tariffs as a top risk</a> back in June. The nonpartisan Peterson Institute <a target="_blank" href="https://www.piie.com/blogs/realtime-economics/2024/trumps-proposed-blanket-tariffs-would-risk-global-trade-war">spoke out against Trump's tariff proposals</a>, as did the right-leaning <a target="_blank" href="https://www.wsj.com/opinion/donald-trump-tariffs-economy-2024-election-kamala-harris-robert-lighthizer-29c07e94">Wall Street Journal editorial board</a>.Although investors may want to take the possibility of tariffs more seriously, Kelly noted that even if they're a major headache, stocks and the economy should still be fine in the long term."I could have said 'pandemic' five years ago, if I'd been incredibly prescient," Kelly said at the conference. "But oddly enough, the global economy bounced back anyway. And so it wouldn't actually have been a very good thing to worry about."

The economy seems to be firing on all cylinders — but a veteran JPMorgan strategy chief says one underappreciated risk could cause a serious global slowdown

The Indian <keyword id="46964" type="General" weightage="20" keywordseo="it-sector" source="Orion">IT sector</keyword>, which has seen contraction in <keyword id="6357342" type="General" weightage="20" keywordseo="hiring" source="Orion">hiring</keyword> amid <keyword id="61483" type="General" weightage="20" keywordseo="global-economic-slowdown" source="Orion">global economic slowdown</keyword> and <keyword id="6412154" type="General" weightage="20" keywordseo="funding-winter" source="Orion">funding winter</keyword>, is likely to witness a positive turnaround with 8-10 per cent increase in hiring in 2024, a new report showed on Wednesday. Overall, the hiring in the IT sector is expected to surge by 12-15 per cent in CY 2024, especially due to the surge in global capabilities centres (GCCs) and global economy settling down comparatively, according to talent solution company NLB Services. "From a quarter perspective, the initial quarter will notice an average 8-10 per cent growth in hiring, followed by Q2 and Q4 demand percentage rising up to 12-14 per cent," said Sachin Alug, CEO, NLB Services. The IT sector has been estimated to have witnessed a growth of 40-45 per cent of jobs in 2023 as compared to 2022. In 2024, hiring is further expected to surge by 15-20 per cent. Owing to global recession and shift in business synergies, the Indian IT sector witnessed a dip during the initial quarters of this year. In fact, in Q1 FY24, IT witnessed the sharpest contraction in headcount in the last three years as companies were experiencing the heat of the <keyword id="29405" type="General" weightage="20" keywordseo="slowdown" source="Orion">slowdown</keyword> in projects, according to the report. "However, the third quarter of this fiscal year is bringing a favourable outlook. Promising prospects are foreseen in green technology, electric vehicles, and an increased emphasis on AI and cybersecurity," Alug informed. In Q2 FY24, the key IT firms reported a 3-10 per cent average increase in their net profits. The positive growth trajectory was largely influenced by IT players securing strong new wins, expanding multi-year renewals with existing clients, and growing investment into technology, etc. "Despite the initial slowdown some of the skill sets which continued to shine in prominence in this segment included software development (with 28 per cent demand), SAP expertise (12 per cent demand), automotive design (14 per cent demand), and testing skills (12 per cent demand). "Some of the most in-demand IT skills next year are expected to include AI/ML experts, DevOps specialists, full-stack developers, cybersecurity experts, Blockchain developers, Cloud architects, UI/UX designers and so on. "Overall hiring in the IT sector is expected to surge by 12-15 per cent in CY 2024, especially due to the surge in global capabilities centres (GCCs) and global economy settling down comparatively," said Alug.

Hiring in Indian IT sector likely to see turnaround with 8-10% growth in 2024

<ul class="summary-list"><li>The first-quarter GDP report surprised investors with disappointing growth, while consumer prices kept rising.</li><li>The provides the backdrop for stagflation, which can't be combated with rate cuts.</li></ul>The latest GDP and inflation readings were what investors were least eager to see, and could hint at serious trouble ahead. "This was a worst of both worlds report – slower than expected growth, higher than expected inflation," wrote David Donabedian, chief investment officer of CIBC Private Wealth US. First-quarter growth fell well behind estimates, rising at an <a href="https://www.businessinsider.com/gdp-gross-domestic-product-first-quarter-economy-growth-2024-4?utm_medium=ingest&amp;utm_source=markets&amp;_gl=1*1c405xn*_ga*MTMxNDIwNDI1Ni4xNjc1Njg3OTU4*_ga_E21CV80ZCZ*MTcxNDA1Mjk4My4zNDMuMS4xNzE0MDYwODk5LjYwLjAuMA..">annualized rate of 1.6%</a>, according to the <a href="https://www.bea.gov/data/gdp/gross-domestic-product" target="_blank">Bureau of Economic Analysis</a>. Not only is that far under forecasts of 2.5%, but it also fails to live up to the 3.4% increase achieved in the fourth quarter. While such a cooldown would usually bolster calls for interest rates to start easing, the report noted a hotter-than-expected rise in consumer prices as well. That puts serious limits on the Federal Reserve's ability to take action, as the central bank has made clear it needs inflation to climb lower before any rate cuts can happen. Stocks — which have long priced in those cuts — <a href="https://markets.businessinsider.com/news/stocks/stock-market-today-q1-gdp-sp500-earnings-meta-microsoft-alphabet-2024-4" target="_blank">sold off sharply</a>. It's also bad news for the economy, as sputtering growth and higher prices are the key ingredients for stagflation, which is characterized by economic listlessness and stubbornly elevated inflation over a prolonged period. Such a scenario that can be even harder to combat than a <keyword id="6357558" type="General" weightage="20" keywordseo="recession" source="Orion">recession</keyword>, because of the dynamic outlined above: the Fed's hands are largely tied. America's last dalliance with stagflation came in the 1970s. The precedent can offer a glimpse into how the US economic picture could unfold, and makes it clear why economists are desperate to avoid a re-run. Early that decade, geopolitical disagreement prompted the OPEC coalition to restrict crude exports to the US, and energy <a href="https://cepr.org/voxeu/columns/wage-price-spirals-historical-evidence" target="_blank">prices rocketed</a> in response. With additional help from high government spending and the <a href="https://www.businessinsider.com/today-is-the-40th-anniversary-of-nixon-ending-the-gold-standard-2011-8">dollar's de-coupling from gold</a>, inflation surged into double digits, while the economy <a href="https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions" target="_blank">tumbled</a>. The period was so tumultuous that it undid long-standing <a href="https://www.businessinsider.in/investment/news/keynesian-economics-a-depression-era-idea-thats-seen-a-resurgence-in-the-21st-century/articleshow/87594974.cms" target="_blank">macroeconomic theories</a>, and required the Fed to step up its role in the economy. In order to finally reign things in, then-Fed Chairman Paul Volcker was forced to raise interest rates a staggering 20%, calming price highs but throwing the US into a deep recession. It's for this reason current analysts <a href="https://www.businessinsider.com/what-is-stagflation-explained-oil-outlook-low-growth-high-inflation-2021-10">shudder at comparisons</a> to the period 50 years ago, and why stagflationary forecasts bear weight. JPMorgan's Jamie Dimon is among those who have recently made allusions to the stagflationary 1970s, warning that markets have become too cheerful about the state of the economy. "I worry it looks more like the '70s than we've seen before," the prominent bank chief <a href="https://fortune.com/2024/04/24/jpmorgan-jamie-dimon-economy-1970-stagflation-fear/" target="_blank">said at the Economic Club of New York</a> last week. His point — one he's asserted <a href="https://www.businessinsider.com/jamie-dimon-jpmorgan-economy-looking-like-1970s-stagflation-inflation-rates-2024-1?utm_medium=ingest&amp;utm_source=markets&amp;_gl=1*1v016fo*_ga*MTMxNDIwNDI1Ni4xNjc1Njg3OTU4*_ga_E21CV80ZCZ*MTcxNDA1Mjk4My4zNDMuMS4xNzE0MDY3NDAzLjI2LjAuMA..">on multiple occasions</a> — comes from the fact that fiscal spending has once again exploded, while the economy is poised to bear a number of inflation-drivers: from <a href="https://www.businessinsider.com/jamie-dimon-soft-landing-outlook-recession-inflation-jpmorgan-geopolitics-2024-4">green industrialization to global remilitarization</a>. But stagflation remains a long shot. Despite sticky-high inflation, markets continue to price in at least one rate cut this year. Further, Barclays analysts led by Pooja Sriram pointed out after the GDP report that final sales to domestic purchasers rose by enough to suggest "demand conditions remain strong." Friday's personal consumption expenditures report — viewed as the Fed's main inflation bellwether — will offer investors a clearer picture of where inflation is headed. If it goes higher, the Fed will have little choice but to become more tighten policy, according to Donabedian. "We are not far from all rate cuts being backed out of investor expectations. It forces Chair Powell into a hawkish tone for next week's FOMC meeting," he said.

The US economy may be barrelling towards stagflation, an outcome worse than recession

<ul class="summary-list"><li>The International Monetary Fund raised its growth forecast for the US economy to 2.8% this year.</li><li>It expects slower growth of 2.2% next year as the government cuts back and the job market cools.</li></ul>The International Monetary Fund raised its growth forecast for the US, projecting the world's largest economy would expand by 2.8% this year instead of the 2.6% it predicted in July.in its latest <a target="_blank" class="" href="https://www.imf.org/en/Publications/WEO/Issues/2024/10/22/world-economic-outlook-october-2024">World Economic Outlook </a>released on Tuesday, IMF staff cited stronger consumption fueled by "robust increases in real wages" and wealth effects, along with non-residential investment, as the two main reasons for the increase. However, they predicted GDP growth would slow to 2.2% in 2025 as the US government curbs its spending and the labor market cools, sapping consumption.The IMF projected global growth of 3.2% in both 2024 and 2025, virtually unchanged from its previous prediction. They underscored their latest forecast for global growth over the next five years of 3.1% was "mediocre" compared with the pre-pandemic average."Persistent structural headwinds — such as population aging and weak productivity — are holding back potential growth in many economies," the agency's staff wrote.They projected only a slight slowdown in China to 4.8% this year due to resilient net exports, and revised their April forecast for 2025 upward by 0.4 percentage points to 4.5%. They noted the Chinese government's stimulus measures "may provide upside risk to near-term growth."The UN financial agency said that growth in the euro area appears to have troughed in 2023, and it anticipates an acceleration to 0.8% expansion in 2024 driven by stronger exports, then 1.2% in 2025 on the back of improved domestic demand.IMF staff made downward revisions to its growth outlook for the Middle East, Central Asia, and sub-Saharan Africa, citing disruptions to the production and shipping of oil and other commodities as well as "conflicts, civil unrest, and extreme weather events."In contrast, they upgraded their April forecasts for emerging and developing Asia by 0.3 percentage points for both 2024 and 2025, to 5.4% and 5.0%. They cited "surging demand for semiconductors and electronics, driven by significant investments in artificial intelligence, has bolstered growth."

The IMF just raised its growth forecast for the US economy this year — but expects a slowdown in 2025

Davos, Global economic growth is estimated to fall to its lowest rate in three decades by 2030 amid the ongoing economic and geopolitical shocks, a new report said on Monday. <keyword id="20205587" type="General" weightage="20" keywordseo="releasing-the-future-of-growth-report" source="keywords">Releasing the Future of Growth Report</keyword> 2024 here ahead of its annual meeting of world leaders, the <keyword id="20020435" type="General" weightage="20" keywordseo="world-economic-forum" source="keywords">World Economic Forum</keyword> (<keyword id="19955159" type="General" weightage="20" keywordseo="wef" source="keywords">WEF</keyword>) said this downturn is exacerbating a range of interconnected global challenges, including the climate crisis and a weakening social contract, which are collectively reversing progress in global development. The report called for a new approach to economic growth that balances efficiency with long-term sustainability and equity, examining speed, and quality together. Analysing the quality of growth across 107 economies, it found that high-income economies score high on innovation and inclusion, while lower-income economies on sustainability. "Reigniting global growth will be essential to addressing key challenges, yet growth alone is not enough," WEF Managing Director <keyword id="20205586" type="General" weightage="20" keywordseo="saadia-zahidi" source="keywords">Saadia Zahidi</keyword> said. "The report proposes a new way for assessing economic growth that balances efficiency with long-term sustainability, resilience and equity, as well as innovation for the future, aligning with both global and national priorities," she added. The WEF also launched its 'Future of Growth' initiative, a two-year endeavour aimed at charting a new narrative for economic growth and supporting policymakers from around the world, together with economists and other experts, in identifying the best pathways in balance growth, innovation, inclusion, sustainability, and resilience goals. The report said that most countries continue to grow in ways that are neither sustainable nor inclusive and are limited in their ability to absorb or generate innovation and minimise their contribution and susceptibility to global shocks.

Global economic slowdown headed for worst phase in three decades: WEF study

Economists at the country's largest lender, SBI, today said they see India's Q2 real GDP growth slowing down further to 6.5% in the September quarter of this fiscal year. Amid concerns over the country's economic growth rate and whether it is slowing down, the analysts said they expect FY25 growth to come "closer to" 7%. SBI analysts join a long line of agencies like Fitch, ADB, IMF, Moody, World Bank, S&amp;P, and even RBI in forecasting India's GDP growth for FY25 in the range of 6.8% to 7.2% for FY25, driven by robust consumption and investment. SIP inflows have been at an all-time high, and so has QIP (qualified institutional placement) fundraising. As many as 71 companies raised Rs 88,678 crore this year through QIPs. Activity in Indian primary markets also remained robust, with 78 mainboard IPOs in 2024; this is a 111% rise from just 38 listings in FY23. Between April and June 2024, India's real GDP grew by 6.7%, the lowest growth seen in 15 quarters, pushing experts to believe that India is caught in a cycle of slowdown. "There is some incipient pressure evident on the domestic economy. Based on our analysis of 50 meaningful leading indicators (both consumption and demand-centric), a dip looks plausible across select cohorts of agriculture, industry, and services in Q2," the <keyword id="22337294" type="General" weightage="20" keywordseo="SBI-economists" source="keywords">SBI economists</keyword> added. Stating that they track 50 indicators to gauge economic activity, SBIs note said the proportion of indicators showing acceleration declined to 69% in Q2 FY25, as against 80% in Q2 FY24 and 78% in Q1 FY25. However, things might be changing now, given that rural demand has started looking up amidst muted urban demand. SBI also explained that the ongoing regulatory tightening on unsecured lending and roadblocks that are hindering rollover/refinancing of debt through unsecured credit are dismantling the unwarranted exuberance that had built up post-pandemic, especially in the urban areas. Madhu Lunawat, CIO &amp; Fund Manager, Bharat Value Fund states that the overall investment environment remains strong due to favorable economic conditions supporting government policies &amp; reforms. "The sustainable inflow from domestic investors is going to support the Indian equity market in any kind of correction. The long-term bullish structure of Indian economy will continue to attract new domestic &amp; global investors to participate in India’s growth story through various Investment avenues.” <h2>Rate cuts not on cards</h2>RBI Governor Shaktikanta Das clarified today that changing the monetary policy stance to 'neutral' does not mean a rate cut is imminent in the central bank's next policy announcement. Notably, RBI MPC is set to meet between December 4 and 6, 2024, to decide if the prevailing repo rate of 6.5%, which has stayed unchanged for the last 2 years, should be brought down or not. In its last meeting, The <keyword id="20501100" type="General" weightage="20" keywordseo="RBI-monetary-policy" source="keywords">RBI monetary policy</keyword> committee had shifted its stance to 'neutral' indicating that it is open to adjusting interest rates based on economic conditions. "It should not be assumed that we have done this, so therefore the next step is a rate cut. A change in stance doesn't mean that the next step is a rate cut in the very next meeting. It's not so," Das said. Das also cautioned that inflation remains a key factor, and inflation and CPI prints for October are expected to stay high.

SBI economists see Q2 GDP growth slowing down to 6.5%; FY25 growth to be closer to 7%

In a rather dampened <keyword id="19915531" type="General" weightage="20" keywordseo="forecast" source="keywords">forecast</keyword> for the Indian economy, <keyword id="19908266" type="General" weightage="20" keywordseo="ICRA" source="keywords" meta.keywordsubtype="org" meta.entityname="ICRA" meta.hostid="261" meta.entityid="ICRA">ICRA</keyword> has forecast a sharp <keyword id="20637625" type="General" weightage="20" keywordseo="slowdown" source="keywords">slowdown</keyword> in India's <keyword id="19972825" type="General" weightage="20" keywordseo="GDP-growth" source="keywords">GDP growth</keyword>. The credit rating agency has projected a year-on-year expansion of 6.0% in <keyword id="22106354" type="General" weightage="20" keywordseo="Q1-FY2025" source="keywords">Q1 FY2025</keyword> — the lowest in the last six quarters. In Q4 FY2024, India recorded an impressive 7.8%. The Reserve Bank of India had expected the growth momentum to continue this financial year as well. Earlier this month, the RBI governor had projected a 7.1% growth in Q1, while the growth rate for the entire financial year FY2024-25 was projected to be at 7.2%. The central bank had attributed this potential robust growth to improved agricultural activity, sustained buoyancy in services activity, healthy balance sheets of banks and corporates, thrust on capex by the government, visible signs of pick up in private investment, and improving prospects of global trade. However, RBI’s growth projections for this financial year were slightly moderated due to lower-than-anticipated corporate profitability, general government expenditure, and core industries output. As per ICRA, the sharp drop in GDP growth is primarily due to parliamentary elections and a contraction in government capital expenditure weakening urban consumer confidence. Another main cause could be the weakening urban consumer confidence, which reported a surprising downtick in the May and July 2024 rounds of the Central Bank’s Consumer Confidence Survey. “The lingering impact of last year’s unfavourable monsoon and an uneven start to the 2024 monsoon prevented a broader improvement in rural sentiment. Lower volume growth combined with diminishing gains from commodity prices weighed upon the profitability of some of the industrial sectors. The heat wave also affected footfalls in various service sectors, even as it provided a significant boost to electricity demand,” said Aditi Nayar, Chief Economist at ICRA. Despite the Q1 slowdown, ICRA expects economic activity to pick up in the latter half of FY2025, projecting an overall GDP growth of 6.8% for the full year, with a potential to exceed 7% in the second half. The agency expects decelerated growth in Gross Value Added (GVA) as well, easing to 5.7% in Q1 FY2025 from 6.3% in the previous quarter. This slowdown is primarily attributed to a decline in industrial growth, which is predicted to moderate to 6.4% from 8.4%, along with slight reductions in the services sector's growth and a modest improvement in agricultural GVA. The difference between GDP and GVA growth is expected to narrow to around 30 basis points (bps) in Q1 FY2025, down from 148 bps in the previous quarter, due to lower growth in net indirect taxes amid a rise in government subsidies. ICRA's analysis indicates that industrial GVA growth is likely to moderate in Q1 FY2025, with a slowdown in manufacturing and construction offset by growth in electricity, mining, and quarrying. Additionally, a contraction in government and state capital expenditure, along with a significant drop in new project announcements, has contributed to the overall slowdown. Manufacturing profit margins have also been under pressure due to rising global commodity prices and narrowing deflation in input costs, which, combined with slower growth in manufacturing output, suggests a deceleration in manufacturing GVA growth. In the agricultural sector, GVA growth is projected to be modest at 1.0% in Q1 FY2025, amidst declining output from most rabi and summer crops and a deficient rainfall in June 2024. With growing concerns around inflation and unemployment in India and across the world, the latest forecast could further fuel the fears around recession and slowdown in major economies. However, a much clearer picture will emerge with the actual quarterly estimates of GDP for Q1 from the National Statistical Office (NSO) next week. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/digital-initiatives-to-triple-indian-retail-borrowing-to-usd-2-5-trillion-by-2030-sp-global/articleshow/112263945.cms" data-type="tilCustomLink" target="_blank">Digital initiatives to triple Indian retail borrowing to USD 2.5 trillion by 2030: S&amp;P Global</a>

ICRA forecasts slowdown in India's economy: GDP growth expected to hit six-quarter low in Q1 FY2025

<keyword id="19991358" type="General" weightage="100" keywordseo="Indian-markets" source="keywords">Indian markets</keyword> are navigating choppy waters as global economic shifts, from rate cuts to evolving political climates, create new pressure points across the financial landscape, according to a recent report by ANI attributed originally to the Union Bank of India. The domestic stock and bond markets showed signs of strain, with <keyword id="19910363" type="General" weightage="20" keywordseo="bond-yields" source="keywords">bond yields</keyword> witnessing slight adjustments. India’s 10-year government bond yield dipped to 6.82%, a decrease from the previous session, reflecting cautious investor sentiment as the markets react to shifting global indicators. Meanwhile, the 5-year bond yield remained steady at 6.76%, a signal of lingering hesitation amid economic unpredictability. In the currency market, the rupee faced a notable decline, ending the day at ₹84.3725 against the US dollar, slipping from its prior close of ₹84.2800. Market analysts point to significant capital outflows as a key factor, with investors moving funds to perceived safer assets overseas. This migration has weighed heavily on the rupee, underlining the currency’s vulnerability in an environment of global economic flux. India’s stock market bore the brunt of this volatility, with key indices falling over 1%, effectively erasing the gains of a previous rally. This abrupt drop reportedly reflects renewed investor anxiety, largely triggered by the recent <keyword id="20189882" type="General" weightage="20" keywordseo="US-presidential-election" source="keywords">US presidential election</keyword> results. Experts suggest that the election has introduced a fresh layer of uncertainty, not only for the US economy but for global markets, impacting everything from policy decisions to investor sentiment. Analysts are also keeping a close eye on upcoming decisions by central banks, which will likely shape the path forward for the Indian equities market. Commodities showed contrasting trends, with Brent crude prices falling on lower demand expectations, as economic indicators point toward cautious spending globally. Gold, on the other hand, experienced a modest rise as investors sought refuge in safe-haven assets, highlighting a shift towards risk aversion among market participants. Globally, major central banks made coordinated efforts to sustain economic growth, with the Bank of England (BoE) announcing a 25 basis-point cut, lowering its benchmark rate to 4.75%. The BoE’s Monetary Policy Committee (MPC) largely backed this move to counter inflation, which has been declining, albeit gradually. Across the Atlantic, the US Federal Reserve mirrored this action with its own 25 basis-point cut, a sign of confidence in the ongoing economic recovery. Both rate cuts, though modest, signal a global trend towards caution as economies work to balance growth with stability. In Asia, the People’s Bank of China (PBoC) maintained its supportive stance. Governor Pan Gongsheng sought to reassure foreign investors by reaffirming the PBoC’s commitment to growth-oriented policies. Pan emphasized enhanced communication and pledged to open China’s financial services sector further, aiming to attract more international participants. Europe, meanwhile, faced mixed economic signals. Germany reported a steep 2.5% drop in industrial production in September, signalling a slowdown in manufacturing, while the Eurozone saw a mild 0.5% rise in retail sales, reflecting cautious consumer optimism in the region. Adding another layer to the global economic landscape, the European Union’s Climate Change Service warned that 2024 could be the hottest year on record, underscoring urgent climate challenges just as the UN COP29 climate summit approaches. The summit, set to take place in Azerbaijan, aims to rally increased funding for climate action, though tempered expectations linger in light of recent US political shifts. On the domestic front, Niti Aayog CEO BVR Subrahmanyam spoke about India’s potential role in pivotal global trade agreements, specifically the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). These partnerships, Subrahmanyam suggested, could bolster India’s Micro, Small, and Medium Enterprises (MSME) sector, which currently accounts for 40% of India’s exports, offering a strategic advantage for Indian trade in an interconnected world. As the Indian markets digest these developments, experts believe continued volatility could be the theme for the coming months. (with ANI inputs)

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