World economy more resilient than the markets

While the latest data have raised fresh questions about the strength of the US economy, we think activity will recover because income growth remains strong while the drags from dollar appreciation and the downturn in the mining sector should fade. Growth in the euro-zone, on the other hand, is likely to slow as the boosts from lower energy prices and the weak euro should also be temporary. Meanwhile, China’s economy has been stable in recent months but Brazil and Russia have continued to struggle. The current low level of oil prices means that inflation will stay subdued for longer than previously expected. This in turn will leave the door open for central banks to keep monetary policy loose, or to provide additional policy support.