We expect developed economies to weather the fallout from China’s August “devaluation” and the subsequent weakness in world equity markets quite well. Activity in the emerging world has slowed further and Brazil and Russia have slipped into recession. Indeed, aggregate growth in emerging markets was only slightly higher than in advanced economies in Q2. However, conditions in the major advanced economies have, if anything, improved somewhat in the past few months. And with the US having reached “full employment” in August, the Fed is still on track to begin raising rates soon.
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