U.N.: World Teeters On Brink Of Ruin

Meh.

The world economy is "teetering on the brink" of a severe downturn and is expected to grow only 1.8 percent in 2008, the United Nations said in its mid-year economic projections Thursday.

That's down from a global growth rate of 3.8 percent in 2007, and the downturn is expected to continue with only a slightly higher growth of 2.1 percent in 2009, the U.N. report said.

The mid-year update of the U.N. World Economic Situation and Prospects 2008 blamed the downturn on further deterioration in the U.S. housing and financial sectors in the first quarter, which is expected to "continue to be a major drag for the world economy extending into 2009."

The U.N. picked a bad day to play housing boogeyman, with housing starts posting what even the AP Economics desk concedes is a "surprising" rebound.  In fact, new home construction rose by a robust 8.2% in April (the swiftest growth in two years), versus expectations of a 1.5% decline.

It's also worth bearing in mind that the U.N.'s economic crystal ball is - to put it charitably - a cloudy one.

The group's World Economic Situation and Prospects underestimates global output year after year after year, yet people continue to lend it credibility.  From the U.N.'s own archived data, their downside bias (even in these mid-year forecasts, when the data ought to be partially knowable) is pretty glaring.

Based on the average lowball in recent years (half a percentage point), the U.N.'s brink-teetering 1.8% forecast for 2008 is likely to clock in at closer to 2.3%.

                                               

	2004	2005	2006	2007	2008
Actual	4.00%	3.40%	3.90%	3.70%	2.30%
Midyear Estimate	3.25%	3.25%	3.30%	3.20%	1.80%
Lowball	-0.75%	-0.15%	-0.60%	-0.50%	-0.50%