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Employees work at a Foxconn factory in Wuhan, China.DARLEY SHEN/Reuters

The World Bank announced deep cuts in its 2014 economic growth forecasts in Asia, but in truth, the loss of economic momentum – both in the emerging and developing worlds – is already visible in previously reported data.

The Washington-based World Bank announced a new forecast for Asian economic growth Monday, reducing gross domestic product expectations to 7.2 per cent from the previous 7.6 per cent.

The development bank cited China's efforts to evolve from an investment-driven growth model to a more consumer-oriented economy as the main culprit for slower growth. Exporting countries, such as energy-rich Indonesia, will bear the brunt of lower commodity prices. Higher interest rates, particularly for those countries that were forced to significantly jack up rates to slow capital flight in early summer, are also expected to form a significant hurdle to growth.

According to the Citigroup Economic Surprise indexes, economic growth in the developing world also appears to be topping out.

The Economic Surprise indexes – which measure economic data points relative to economist expectations – are uniquely well suited to investors. (For reference, if all data came in exactly where economists expected, the index reading would be zero.)

Market prices are highly sensitive to changes in the rate of growth, and this applies both to fixed income and equity markets. By reflecting surprises, data reported below or above estimates, the indexes provide strong signals when the rate of economic growth changes.

The view at the moment, while not apocalyptic, is hardly encouraging. The U.S. Surprise Index is down more than 10 points from the September highs, reflecting weaker-than-expected industrial production, housing starts and most importantly, gross domestic product. (The data points in the index are weighted by importance; a miss for GDP, for instance, has a bigger impact than consumer sentiment results.)

China looks okay for now after reopening the credit spigots, but Europe looks like it's rolling over. The biggest eye-opener is the surprise index for broader emerging markets, which is extremely weak, reflecting deteriorating data from Brazil and India.

Again, these numbers reflect data relative to economist estimates, not actual growth levels, and in that sense reflect the level of economic optimism more than actual activity.

Still, economic data falling short of expectations is significant in the same way that a stock missing profit targets is important, only writ large, for an entire economy.

The Citi Economic Surprise indexes reflect a widespread deterioration in global growth expectations, and Canadian investors should take this seriously. Slower growth implies that a recovery for stocks sensitive to global activity, like resources, are still a ways off.

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