Another first-quarter blip

The weakness in advanced economies early this year, which was largely driven by softer household spending, looks like a temporary setback rather than anything more ominous. Admittedly, economic growth may have passed its peak in the euro-zone, and has certainly done so in the UK. But business surveys stabilised in both countries in April. In the US, we expect growth to rebound over the rest of this year as the benefits of the tax cuts kick in. Despite the anaemic wage data published today, the Fed looks almost certain to raise rates again in June, and we expect two more hikes in the second half of the year. Meanwhile, our calculations suggest that the softness in advanced economies was offset by an improvement in the emerging world, at least in q/q terms. While there are problems in familiar EM trouble spots, notably Argentina and Turkey, these are likely to have very little impact on the wider global economy.