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Fed officials look increasingly confident in their plans to raise interest rates twice more this year while ECB officials are on course to end their asset purchases by December. Next year, though, we expect the Fed to raise rates only two more times …
30th August 2018
The latest Turkish activity data suggest that the plunge in the lira since May, and the associated sharp tightening of financial conditions, has tipped the economy into recession. Things are only likely to get worse and our GDP growth forecasts lie well …
29th August 2018
The growth of world trade volumes seems to have stalled in the first half of the year. However, some more timely data and survey evidence suggest that it should pick up again in the second half of the year, provided that the global “trade war” does not …
24th August 2018
Preliminary business surveys for August point to a further loss of momentum in the manufacturing sector, but the composite surveys suggest that GDP growth is holding up reasonably well. Meanwhile, export orders have stabilised but at a much lower level …
23rd August 2018
Both the consensus and financial markets are coming around to our view that the Fed will cut interest rates in 2020, but we still think they are underestimating how soon and how fast the Fed’s policy cycle is likely to turn. We expect that a sharp …
22nd August 2018
Even if emerging market assets remain under pressure this year, we don’t expect the crises in Argentina and Turkey to be replicated in other emerging economies. Meanwhile, domestic conditions in the US and euro-zone support the case for gradual policy …
Developments over the past few weeks have made it more likely that Italy’s Government will implement some form of fiscal stimulus in next year’s Budget. This is likely to cause bond yields to rise further. However, contrary to some Italian politicians’ …
17th August 2018
Surveys of consumer confidence have been unusually strong in the past two years, but their usefulness as a guide to spending has deteriorated. What’s more, experience shows that both confidence and spending could fall abruptly if the economic outlook …
Credit has continued to expand steadily in most major advanced economies in recent months and is rising particularly strongly in the US. Meanwhile, the currency crisis in Turkey has so far had only a fairly small knock-on effect on financial conditions in …
16th August 2018
As expected, the first effects of tariffs introduced by the US and some of its key trade partners are quite small. The main risk to the world economy is from a much bigger escalation of the trade war rather than from anything announced so far – but that …
15th August 2018
The plunge in the lira which began in May now looks certain to push the Turkish economy into recession and it may well trigger a banking crisis. This would be another blow for EMs as an asset class, but the wider economic spillovers should be fairly …
10th August 2018
Some commonly-cited indicators suggest that the global economy has lost momentum recently. But a closer look indicates that most of these do not have a very good relationship with GDP growth. And those which do have the drawback of not being timely. … A …
9th August 2018
In this follow-up to our recent Global Economics Focus “Why is property so often the source of trouble?” we assess where in the world the biggest risks to property prices lie. House price falls in a number of places look imminent. And there are several …
8th August 2018
The most likely outcome of the midterm elections is legislative gridlock, although a second round of tax cuts would be unlikely even if the Republicans narrowly maintain control of both Houses of Congress. … US midterms 2018: What's at …
7th August 2018
The slide in the price of copper in the past few weeks has added to concerns about the health of the world economy. But while it may provide further evidence that China’s economy is slowing, we do not think copper prices are a particularly reliable …
6th August 2018
The world economy has rebounded after a sluggish first quarter, with global growth rising to around 4% annualised in Q2. But we doubt that this will last long because it has largely resulted from a fiscal-stimulus-induced surge in the US economy. What’s …
3rd August 2018
It is now ten years since the property-induced global financial crisis and house prices in many countries are rising rapidly again. So now seems like a good time to assess whether property, residential and commercial, is on course to cause trouble for the …
2nd August 2018
The fall in Markit’s global manufacturing PMI in July supports our view that Q2 marked the peak in global growth. However, the slowdown now underway should be gradual for the next year or so. … PMIs point to softer …
1st August 2018
While global economic growth rebounded in Q2, it will probably slow again in the second half of this year and in 2019. The US will not be able to sustain annualised GDP growth of 4%, China’s economy is slowing steadily, and any pick-up in the euro-zone …
31st July 2018
In our view, speculation that the Bank of Japan is preparing to dial back its ultra-loose monetary policy is misplaced. Meanwhile, the ECB is likely to leave its policy rates at rock-bottom levels until September 2019, if not later. In contrast, with the …
27th July 2018
Although the more extreme warnings about the short-term impact of a “no-deal” Brexit on the economy are overdone, there is little doubt that it could deal a reasonable blow to GDP growth next year. … How much damage would a Brexit “no deal” …
25th July 2018
World trade volumes rose in May but their underlying rate of growth dropped again. We continue to think that the evidence does not yet point to anything worse than a modest slowdown. … World trade losing momentum, but not …
Preliminary PMIs for July fell but remain consistent with GDP expanding at a decent pace in advanced economies. The surveys also point to growing price pressures and slower world trade growth. … Surveys softer at start of Q3, but still …
24th July 2018
The UK Government’s Chequers proposals are still broadly intact following a tumultuous week in Parliament. The Prime Minister suggested that the proposals would also solve the Northern Ireland border problem. But the EU first wants to focus on a backstop …
20th July 2018
The EU’s and, particularly, Germany’s trade practices have been criticised heavily by President Trump, prompting him in early July to label the trade bloc “as bad as China”. However, from a global perspective, neither their bilateral surpluses with the US …
Global GDP growth should remain strong over the rest of this year, due to healthy growth in household consumption and business investment. Inflation is likely to trend towards 2% in most advanced economies, but will do so at different rates. So while the …
19th July 2018
We agree with the IMF’s global GDP growth forecasts for 2018 but suspect that their forecasts for 2019 will need to be lowered. We think that the US and Chinese economies will slow by more than the IMF anticipates next year, even if the global trade war …
16th July 2018
Yield curves are their flattest since 2007/08 in a few advanced economies, a development commonly viewed as signalling an economic downturn. However, it’s unlikely that we are headed for a global recession. What’s more, we are not too concerned about the …
13th July 2018
President Donald Trump would probably struggle to pull the US out of the WTO on his own. But unless Congress starts taking a tougher stance against his protectionist urges, the continued use of tariffs justified on national security grounds could …
11th July 2018
Global monetary and credit conditions should remain supportive of GDP growth in the near term, even though the stock of assets purchased under “global” QE programmes is close to peaking. … Monetary Indicators Monitor …
Assessing the damage from a global trade war is tricky because there are few historical precedents and the costs would depend on the nature of the conflict. But our best guess is that, if all governments imposed blanket tariffs of around 25% on all …
9th July 2018
With the US and China poised to impose tariffs on each other in the coming days trade tensions look set to ratchet up further. But the world economy is still doing well. We estimate that global economic growth picked up a bit in the second quarter and …
5th July 2018
The tariffs imposed by China and the US on $34bn of each other’s imports – that will come into force on Friday – are likely to have a small, negative impact on most of the emerging world. But some EMs could see an offsetting, positive impact from a shift …
3rd July 2018
Markit’s global manufacturing PMI slipped at the end of Q2 but remains consistent with a rebound in world GDP growth. We think that the latter picked up to over 3½% annualised last quarter. … Surveys point to rebound in Q2, despite trade …
2nd July 2018
Over the next twelve months we expect the gap in policy rates between the US and euro-zone to continue to widen. The Fed is likely to raise rates every three months while the ECB leaves rates unchanged until late next year. Further ahead, though, we think …
28th June 2018
President Trump’s threat to retaliate to EU tariffs with a 20% tax on EU car exports sounds alarming. In fact, the direct effect on the euro-zone would be smaller than you might think, perhaps reducing GDP by 0.1%. But the threat points to a rising risk …
26th June 2018
The rebound in world trade volumes in April offers some reassurance that global trade has not collapsed. And while recent survey and “hard” data are giving some mixed signals about the near-term outlook, on balance they suggest that the world economy is …
25th June 2018
Business surveys for June, which were published by Markit today, reinforce our view that GDP growth in advanced economies rebounded in the second quarter. … Advanced economies entering Q3 with …
22nd June 2018
Given the strength of their labour markets, wage inflation is likely to pick up a bit in the US, UK and, to a lesser extent, the euro-zone and Japan over the coming quarters. But as Jerome Powell remarked in a speech earlier today, it generally looks set …
20th June 2018
Inflation in most major advanced economies is likely to trend towards 2% over the next couple of years. Despite record-low unemployment rates, wage inflation is likely to remain fairly weak in most countries. In addition, oil prices are likely to decline. …
15th June 2018
The Fed delivered another 25bp hike in its fed funds target range to between 1.75% and 2.00% today and the updated interest rate projections show that officials now anticipate an additional two 25bp hikes this year (up from one hike in the March …
13th June 2018
Our best guess is that even if all the protectionist threats made to date were carried out, they would subtract a lot less than half a percent from global GDP. A free-for-all, in which all governments imposed high trade barriers, could cause a global …
Today’s historic summit between Donald Trump and Kim Jong Un represents an extraordinary turn of events, and comes just a year after it appeared North Korea could be heading for a devastating war with the US. In this Update , we answer five key questions …
12th June 2018
We expect rising interest rates to cause economic growth to slow sharply next year, especially as the boost from fiscal stimulus fades. Our best judgement is that there’s a 30% chance of a mild recession before the end of the decade, but the risks would …
Despite the recent sell-off in peripheral European bond markets, we still expect the Fed to raise rates again tomorrow and the ECB to announce at its meeting on Thursday its plans to bring its asset purchases to a close by the end of the year. With the …
The EU has shunned the Government’s backstop proposal for the whole of the UK to remain in the EU’s customs territory at the end of the transition period. It seems to us that this forces the Government into a straight choice between accepting the need for …
8th June 2018
Although there are early signs that the finances of US households are coming under a bit of pressure as interest rates rise, the near-term outlook for household consumption in advanced economies remains fairly bright. By past standards, debt burdens and …
The risk of a global trade war has risen in the past few weeks. President Trump has gone ahead with plans to levy tariffs on steel and aluminium imports, which is likely to provoke retaliation. In fact, just today Mexico announced plans to impose tariffs …
5th June 2018
