Global shortages and energy costs prompt IMF to cut growth outlook   

Shortages in energy supply shortages have started to bite across the world, leading to rising costs.

Smoke stacks of a coal-fired power plant. China is urging coal miners to boost output at industrial plants to tame the record-high coal prices.

Global shares fluctuated as investors digested concerns by the IMF that the global economic recovery has lost momentum and become increasingly divided, even as it stuck by its prediction for a robust rebound from the Covid-19 recession. 

The IMF's cut in its growth outlook for the US and other major industrial powers reflected persistent supply-chain disruptions and pricing pressures.

The Washington-based lender now expects output to expand 5.9% worldwide this year, down slightly from what it had anticipated in July and a bounce from the 3.1% contraction of 2020, it said in its latest World Economic Outlook. It held the forecast for 2022 at just below 5%. 

The US "earnings season is going to give us a really good clue of where we’re going on some of these supply issues”, Alicia Levine, head of equities and capital market advisory at BNY Mellon Wealth. 

Energy supply shortages have started to bite across the world.        

Authorities from Beijing to Delhi scrambled to fill a yawning power supply gap, triggering global stock and bond market wobbles on worries that rising energy costs will stoke inflation and curtail economic recovery.

Power prices have surged to record highs in recent weeks, driven by shortages in Asia and Europe, with an energy crisis in China expected to last through to the end of the year and crimp growth in the world's second-largest economy and top exporter.

China took its boldest step in a decades-long reform of its energy sector, saying it will allow coal-fired power plants to pass on the high costs of generation to some end-users via market-driven electricity prices.

Steam billows out of the cooling towers at a coal-fired power station in Nanjing in east China's Jiangsu province. Picture: Chinatopix via AP

Pushing all industrial and commercial users to the power exchanges and allowing prices to be set by the market is expected to encourage loss-making generators to increase output.

The impact of supply crunches in power and manufacturing components is showing up in data from Tokyo to London, adding to a deepening disquiet in global markets and underscoring the difficulty in cutting the world's dependency on polluting fossil fuels a month before global climate change talks.

Data showed Japanese wholesale inflation hit 13-year highs last month, while shoppers in Britain slashed spending and China recorded a 20% drop in car sales.

China's latest reform follows a raft of measures including urging coal miners to boost output and manage electricity demand at industrial plants to tame the record-high coal prices and to ease the power crunch across the country, with utilities unable to keep up with post-pandemic demand.

And, in a move that could push up already high global prices, India has asked power producers to import up to 10% of their coal needs, and has warned states that their power supplies will be curbed if they are found selling electricity on power exchanges to cash in on surging prices.

India is the world's second-largest coal producer, with the fourth-largest reserves. 

Reuters