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A year after the Fed began shrinking its balance sheet, global central banks’ net asset purchases have slowed sharply, and they are set to turn negative in January. However, we doubt that this will cause a sharp sell-off in global bond markets or that it …
3rd October 2018
The new trade deal agreed with Canada and Mexico won’t in itself have much impact on the US economy. Along with the deal recently agreed with South Korea, however, it provides another example of President Donald Trump backing down from his hard-line …
1st October 2018
The fall in Markit’s global manufacturing PMI in September supports our view that global growth peaked in Q2. We think growth will slow further over the next two years as the US and China lose momentum. … Surveys weaken at the end of …
There are now only six months left to negotiate the deal under which the UK will leave the EU and move into a transition period. This Update lays out five key questions and answers on what still needs to be done, and the pitfalls that could lead to a …
27th September 2018
We think the Fed is likely to raise interest rates three more times by the middle of next year. By 2020, however, we suspect that Fed officials will reverse course and cut interest rates in response to a slowdown in the economy. Other major central banks …
We expect the slowdown in world trade growth to continue next year as global demand weakens. Meanwhile, US-China trade tensions have risen – both countries imposed further tariffs on each other’s imports yesterday. But the aggregate impact on the global …
25th September 2018
Preliminary PMIs suggest that GDP was expanding at a steady pace in advanced economies in September. The euro-zone has not recovered from a weak first half of the year, and the US has continued to do much better. Meanwhile, there is no sign of a rebound …
21st September 2018
Global money and credit conditions remain accommodative. Broad money has been expanding at a decent pace and the latest lending data are encouraging. There are, however, some signs that higher interest rates in the US are beginning to weigh on household …
We have revised up our forecast for the price of Brent crude, but still expect it to fall in the coming year or so, helping to reduce headline inflation. However, we don’t expect this to have much impact on monetary policy, because central bankers in …
19th September 2018
With a further $200bn of US tariffs now confirmed, and China reiterating that it will retaliate with tariffs of its own, we take stock in this short note of where China stands in the trade war. … Taking stock of the new …
18th September 2018
Following a long period of tightening labour markets, wage pressures are mounting, and we think this will lead to a gradual pick-up in average earnings growth. Core inflation rate will probably rise quite sharply in the US next year but then drop back as …
17th September 2018
Ten years after the collapse of Lehman Brothers, there are concerns that the financial markets will bring the global economy to its knees again. We do not think, however, that they will be a major cause of the next recession, despite claims that the …
14th September 2018
Ten years after the collapse of Lehman’s, the risk of something similar occurring again in the near future appears to be low. But looking for the next Lehman’s misses the point – crises on the scale seen in 2008 are rare and, while a repeat looks unlikely …
13th September 2018
The risk that higher interest rates will trigger widespread corporate defaults and cause the next global downturn is low, not least because business finances are generally in good shape. But as monetary policy is tightened, companies may scale back …
12th September 2018
For many companies the effects of the US and China imposing tariffs on all their bilateral trade would be substantial. But the macroeconomic consequences for the two countries, let alone the wider world, would be surprisingly small. Both are fairly closed …
11th September 2018
Despite the steady flow of negative news about protectionism and crises in emerging economies, global growth is holding up well in Q3. Moreover, the labour market has continued to strengthen, particularly in the US, making two more rate hikes this year a …
7th September 2018
The EM sell-off appears to have become more broad-based in the last few days, although there is little evidence that – outside Turkey and Argentina – the market turmoil is resulting in macroeconomic strains. The bigger concern over the next 12-18 months …
5th September 2018
Global manufacturing growth continued to lose momentum in August, according to the latest PMIs, though they still point to world GDP growth holding up reasonably well in Q3. … PMIs slip …
4th September 2018
While the threat of a US-Mexico trade war may have diminished, the trade conflict between the US and China looks set to escalate. And overall, protectionist rhetoric and policies are likely to continue having a big impact on some sectors and markets. But …
31st August 2018
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
