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last updated 8 January 2015

Economy: IMF upgrades global outlook

The International Monetary Fund predicts the world economy will grow faster this year than in any of the three last years, said Don Lee in the Los Angeles Times. The IMF said this week that it expects a 3.7 percent increase in global output, up from 3 percent last year, “thanks largely to a strengthening U.S. economy.” The agency predicted U.S. growth of 2.8 percent in 2014, up from an estimated 1.9 percent last year. The IMF was also optimistic about improving prospects for the U.K. and Japan, and predicted that the Chinese economy would grow by 7.5 percent this year, roughly on pace with last year.

But the outlook isn’t all sunny, said Mark Thompson in CNN.com. IMF Managing Director Christine Lagarde has warned “that dangerously low inflation” could still imperil the world economy. Particularly in the euro zone, the IMF said, “risks to activity associated with very low inflation” have become more prominent. It expressed concern that low inflation could worsen into deflation, causing “a downward spiral of activity as consumers postpone spending in anticipation of cheaper prices in the future.” The IMF raised its growth forecasts for Germany and Spain, left France’s unchanged, and trimmed its estimate for Italy.

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It was a good quarter for Johnson & Johnson, said Jonathan D. Rockoff and Tess Stynes in The Wall Street Journal. The health-care company posted fourth-quarter profits of $3.5 billion—an increase of 37 percent over a year earlier—on $18.4 billion in sales. Demand for drugs like Remicade, the firm’s rheumatoid arthritis treatment, drove the gains, with help from its Tylenol and Motrin products. But the company also said it would cut $1 billion in costs by 2017, “in part by consolidating some operations and eliminating jobs.”

J.C. Penney’s attempts “to get back on the path to profitability” spell bad news for its workforce, said Anne D’Innocenzio and Mae Anderson in the Associated Press. The retailer said last week it will soon cut 2,000 jobs and close 33 stores, suggesting that its “holiday season sales were not what the company hoped for.” Penney is still “trying to recover from massive losses and plummeting sales drops that occurred under former CEO Ron Johnson,” and the latest cuts “should save more than $65 million annually.”

Delta Air Lines is flying high, said Charisse Jones in USA Today. The carrier “posted a $558 million profit for the last quarter of 2013, as more passengers climbed aboard, then paid more to fly.” Compared with the same period a year earlier, the airline’s passenger traffic grew 2 percent while revenue jumped 6.1 percent, or $451 million. This year “Delta plans to continue swapping out its smaller 50-seat regional jets, which guzzle fuel, with more cost-efficient aircraft.” And a new partnership with Virgin Atlantic, “which kicked into gear Jan. 1, is allowing it a major footprint in Europe’s primary hubs.”

Chrysler now has a sole owner, said Tommaso Ebhardt and Mark Clothier in Bloomberg.com. Italian carmaker Fiat this week completed its takeover of the American firm, doling out $1.75 billion in cash to Chrysler’s other owner, a United Auto Workers retiree health-care trust. The deal, totaling $4.35 billion, is another “step in Fiat CEO Sergio Marchionne’s decade-long drive to convert the company from an unprofitable regional player into a carmaker with worldwide ambitions.” The two together form the world’s seventh-largest carmaker.

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