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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
Markit’s global manufacturing PMI, which has fallen significantly since the start of the year, slipped again in May. That said, it is still consistent with world GDP growth rebounding in the second quarter. … Global Manufacturing PMI …
1st June 2018
For now, we don’t expect the geopolitical developments to alter the behaviour of the major central banks. Provided that the political crisis in Italy does not flare up again, we think the ECB is likely to unveil its timetable for winding down QE at its …
The direct exposure to Italy of banks located outside the euro-zone is small compared to that of their peers based in other euro-zone countries. This offers some reassurance that any fallout from Italy’s troubles should be contained, unless or until the …
31st May 2018
We have written extensively about political and economic developments in Italy in our Europe and Markets services. (See a list of relevant publications on page 2.) But as the events of the past few days have now affected global markets, this Update …
29th May 2018
The latest data provide further evidence that the world economy has lost some momentum. Growth of world trade has softened significantly in recent months, mirroring the weakness in the purchasing managers’ surveys. That said, it does not yet point to …
25th May 2018
Slowing population growth and population ageing will weigh heavily on economic growth in the coming decade or two, particularly in Europe and Asia. These forces will be only partly offset by increased participation in the workforce by women and older …
24th May 2018
Preliminary business surveys for May, published by Markit today, suggest that the moderate slowdown in economic growth may have continued in the second quarter, at least in the euro-zone and Japan. … Flash PMIs …
23rd May 2018
The slowdown in advanced economies in Q1 was partly a result of weak consumption growth. But we think that household spending will recover in Q2 and grow at a decent pace during the rest of 2018. … Household spending growth likely to rebound in …
17th May 2018
Argentina’s currency crisis and turn to the IMF for financial support have raised questions about how much ammunition EMs’ foreign exchange reserves provide. On the broadest measure of external financing needs, Venezuela, Ukraine and Turkey are, along …
15th May 2018
Oil price movements have big effects on individual economies, companies and assets. But we suspect that their impact on aggregate global demand is smaller now than it was a decade or two ago. This is due to the fiscal situation in the Gulf, the shale …
In March, broad money growth slowed a bit in the euro-zone, UK and Japan. Indeed, in the euro-zone it dropped to its slowest rate since the ECB started its Asset Purchase Programme in early 2015. However, in all of these cases, the pace of money growth is …
11th May 2018
The current troubles in Argentina and Turkey are not the start of a systemic emerging markets crisis, but we do think that EM growth will slow this year. With a US-led slowdown in advanced economies likely next year, global economic growth will probably …
10th May 2018
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 …
4th May 2018
Business surveys for April, published today, suggest that global manufacturing conditions started Q2 in good shape and support our view that world GDP growth will pick up a bit in Q2. … Global Manufacturing PMI …
2nd May 2018
The fact that the slowdown in advanced economies has been so broad-based raises the question whether it is more than just a blip. However, strong business surveys and fundamentals suggest that economic growth will rebound in the coming months. We don’t …
Germany faces little threat from the US aluminium and steel tariffs that might come into force this week, but would be hit harder than most other European economies if the US imposed broader tariffs. That said, these alone would probably only dent …
30th April 2018
Despite economic activity slowing in Q1, we expect the Fed to press on with three more rate hikes this year, not least because inflation has been higher than anticipated in recent months. But in the euro-zone and Japan, where both economic activity and …
Today’s landmark summit between the two Koreas should help to remove a major tail risk for the region’s markets and economies. However, the impact on South Korea’s economy of an easing in tensions is unlikely to be that significant. … Summit talks and the …
27th April 2018
Data published earlier today show that global trade was expanding rapidly in the three months ending in February. More timely business surveys suggest that it may have slowed since then, but they have not yet fallen far enough to cause major concerns. … …
25th April 2018
We think the recent rise in oil prices is likely to be reversed. But even if prices rose steadily to $100pb, there would be little fallout for global growth, despite an increase in headline inflation. … World economy can cope with higher oil …
24th April 2018
The business surveys for April, published by Markit today, support our view that the weakness of some of the recent data for advanced economies probably doesn’t mark the start of a sustained slowdown. … Flash PMIs …
23rd April 2018
Despite some weakness in the first quarter, and concerns about protectionism, global economic growth is likely to hold up well this year. In advanced economies, the outlook for investment and household consumption is fairly bright. Tightening labour …
20th April 2018
The IMF’s latest Fiscal Monitor has put the rise in EM public debt over the past decade back under the spotlight. While debt ratios have increased across most of the emerging world, major vulnerabilities are concentrated in a few relatively small …
19th April 2018
Forget Brexit – the biggest thing to happen to the UK economy over the next couple of years could be the advent of a Labour government, and a particularly left-wing one at that. On the plus side, this could bring a small fiscal boost and a softer Brexit. …
18th April 2018
Even if the US and China were to follow through on their recent protectionist threats, the impact on global growth in the next year or two would be small. Moreover, a bigger and more damaging escalation of protectionism seems unlikely, at least in the …
China’s bilateral trade surplus with the US and concerns about unfair trade practices are likely to keep US-China trade tensions boiling for a long time. But China’s overall current account surplus is much less of a concern for the world economy than it …
12th April 2018
In an attempt to de-escalate trade tensions, Xi has pledged to speed up efforts to reduce trade and investment barriers, boost competition and bolster intellectual property protections. This could provide Trump with an opportunity to back down from his …
10th April 2018
