Global growth cuts

South America will grow at a slower pace than last year, mainly
due to stuttered growth in Argentina and Brazil, according to a UN
report. The Economic Commission for Latin America and the Caribbean
(ECLAC) forecast the whole area would slow to 3.2% in 2012, down
from 4.3% last year. ECLAC blamed the global economy, which has
been hit by the Eurozone debt crisis and slowing Chinese growth.
The report, the Economic Survey of Latin America and the Caribbean,
recognised private consumption as “the main driver of regional
growth, thanks to the growth in labour markets, increased credit
and – in some cases – remittances”. Brazil and Argentina are
forecast to grow less than their neighbours. Argentina’s economy
will grow 2% and Brazil will grow 1.6%, ECLAC suggested. That is
less than predicted by Brazil’s finance ministry, which cut its
growth forecast for 2012 to 2% this year, down from its previous
forecast of 3%.

It has been a similar story in Asia where the Asian Development
Bank (ADB) has reduced its growth forecast for Asia for the next
two years, as financial problems in Europe and the US hurt emerging
countries. The bank projects that Asia excluding Japan will expand
6.1% this year, down from a July estimate of 6.6%.It also forecast
inflation would be 4.2% rather than 4.4%.The ADB said countries in
Asia must reduce their reliance on exports. It singled out slowing
growth in China and India, two of the biggest economies in the
region, as the main driver of the revision. “Deceleration in the
region’s two giants, the People’s Republic of China and India, and
in other major exporting economies is tempering earlier optimism,”
the ADB said.

Today is all about service PMI data across Europe. Specifically,
we will get the final readings for September and first estimates
for peripheral countries like Italy, Spain and Ireland, alongside
the UK’s PMI for September. Euro area retail sales for August might
also get some attention today which is expected to have contracted
slightly in August. This afternoon in the US focus will be on ISM
non-manufacturing and the ADP private employment report that might
give some early indications on the important US labour market
report on Friday. Largely in line with consensus we expect ISM
non-manufacturing to have declined marginally in September. Germany
will be closed today for public holiday.

The Greenback appreciated against all G10 currencies overnight
as renewed concerns about Spain weighed on risk sentiment. This
morning, the weak Chinese non-manufacturing PMI data in particular
weigh on AUD and NZD, which have declined 0.7% and 0.9%
respectively against Dollar.