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Fiscal policy in advanced economies is set to be loosened this year for the first time since 2010. Governments in the US and Canada have increased spending while budget deficits in many European countries will rise, in part due to the refugee crisis. …
15th April 2016
We are not convinced that negative policy rates will prompt households to save more, in aggregate, even though some may step up their savings for retirement. There are many other drivers of savings rates, and lower interest rates will tend to boost …
14th April 2016
Despite being revised down yet again, we think the IMF’s latest projections for global growth are still too high. This is partly because the IMF appears to be constrained by the official, government forecasts for China and India, but its projections for …
12th April 2016
Business surveys edged up in March but still point to global economic growth of only around 2%. In the US, jobs growth remained strong and, with core inflation pressures building, we think the Fed will raise rates three times this year, beginning in June. …
6th April 2016
Consumption growth has slowed in every major advanced economy over the past six months or so, but prospects for the rest of the year are mixed. Spending should pick up again in the US, where the fundamentals remain strong, whereas the consumer recovery in …
5th April 2016
The final Markit manufacturing PMIs, published today, suggest that, having slowed sharply in February, global manufacturing growth recovered in March. … Global Manufacturing PMI …
1st April 2016
Growing support for populist politicians and political parties in a number of countries has fuelled fears that the global economy is set for an era of greater protectionism. But while world trade is likely to remain sluggish in the years ahead, the risk …
31st March 2016
Broad money and credit have continued to grow at a steady pace since the start of the year while government and corporate bond yields have dropped back. The prospect of further easing from the ECB and Bank of Japan should ensure that global monetary …
30th March 2016
The volume of world trade contracted slightly at the start of the year and it is likely to remain sluggish in the coming months. However, the recovery in commodity prices, which we expect to continue, should provide a significant boost to the value of …
24th March 2016
Labour markets in all the major advanced economies have been tightening for several years, and in many cases they are now close to full employment. At face value this suggests that the world may be on the verge of a broad-based pickup in wage inflation. …
Preliminary PMIs published by Markit today suggest that, having slowed sharply in February, manufacturing growth in advanced economies remained very weak in March. The flash manufacturing PMIs rose slightly for the euro-zone and US, but fell in Japan. As …
22nd March 2016
Helicopter money may be the next big thing as policymakers reach the limits of standard unconventional policies. In theory, it can fund an unlimited increase in both public spending and the money supply. In practice, though, it need not be as radical as …
21st March 2016
Emerging economies will not regain their pre-crisis growth rates any time soon, but we think they will recover this year and continue to grow more quickly than advanced economies. What’s more, they now account for more than half of world GDP. Overall, …
18th March 2016
Headline inflation in most advanced economies should rise towards the end of this year, when the effects of the past slump in energy prices finally drop out of the annual comparison. Core inflation has already picked up in the US and, with the …
15th March 2016
The management of the IMF has suggested that the world economy is slowing sharply and warned that things could get a lot worse. But in our view, although global growth may have slipped a little recently, it is not grinding to a halt, and neither have the …
9th March 2016
Negative interest rates have come under attack recently, but in our view most of the criticisms are over-stated. In particular, the costs of negative rates for commercial banks appear to be very small, and, despite the recent comments by the Bank for …
8th March 2016
Financial markets have recovered some poise since mid-February. This may be due to some more encouraging economic data from the US, which has dispelled fears that it is on the verge of a recession. There are also rising expectations of further policy …
3rd March 2016
The final manufacturing PMIs for February, published by Markit today, suggest that manufacturing activity slowed in 19 of the 24 economies for which data are released . … Global Manufacturing PMI …
1st March 2016
The G20 was probably right to include UK exit from the European Union on its list of potential risks to the global recovery, especially given the precedent of the euro-zone crisis in 2011-12. However, the negative impacts of ‘ Brexit ’ are likely to be …
29th February 2016
There is undoubtedly less scope for policy easing than there was a few years ago, but the charge that central banks are now powerless is, in our view, exaggerated. For a start, policymakers still have room to cut deposit rates further and expand their QE …
25th February 2016
With the exception of 2009, the value of world trade fell more sharply in dollar terms last year than in any other year during the past two decades. However, this was largely due to the slump in commodity prices. The volume of world trade actually …
Calls for co-ordinated policy easing ahead of this weekend’s G20 meeting will almost certainly cometo nothing. However, officials should at least seek to reassure investors that the world is not on theverge of a fresh crisis and that they still have some …
24th February 2016
Last year, the slump in oil prices turned out to be less of a bonanza for the world economy than most had anticipated. This year we expect oil prices to be more stable, but still relatively low. In these circumstances, the positives should finally …
23rd February 2016
Flash PMIs published today point to a fairly sharp slowdown in manufacturing growth in advanced economies in February. The flash manufacturing PMIs for the euro-zone, Japan and the US all fell. As a result, a weighted average of the three dropped from …
22nd February 2016
Despite the persistence of low oil prices we still think that inflation in the major advanced economies will rise this year. That said, it is only likely to increase substantially above 2% in the US, while in the euro-zone and Japan, underlying inflation …
19th February 2016
Broad money growth has slowed somewhat in the four major advanced economies in recent months. However, bank lending to the private sector, which is a better guide to economic prospects, has generally held up better. … Credit growth still strong in the …
17th February 2016
The recent declines in global equity prices may negatively affect household consumption via confidence and wealth effects, but any impact should not be huge. It would probably take further sharp falls, or a slowdown in property markets, to have a …
15th February 2016
In principle, cutting policy rates into negative territory should boost growth and inflation. But central banks have not communicated these benefits clearly, and the hesitant way in which they have been introduced has undermined confidence, raising the …
12th February 2016
Recent financial market turmoil has prompted speculation that G20 finance ministers and central bank governors will discuss the merits of closer exchange rate coordination at their gathering in Shanghai later this month. However, there is not even a …
11th February 2016
While some recent survey evidence has hinted that loan growth in the US may be about to slow, money and credit data in the four major advanced economies as a whole so far provide little support for the view that the world is on the verge of a broad-based …
Experience since 2009 shows that the current crop of central bankers do not hesitate to change course if they think that is the right thing to do. Indeed, central banks in numerous advanced economies have tightened policy since the global financial crisis …
9th February 2016
The recent problems in many emerging markets have revived fears that the world is only now entering a ‘third leg’ of the global financial crisis (GFC) – the first being the meltdown in the sub-prime mortgage market in the US in 2008 and the second the …
8th February 2016
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 …
4th February 2016
The Bank of Japan last week became the fifth central bank to impose negative rates and we now expect it to lower its deposit rate to -0.7% by the end of this year. If policy eventually needed to be loosened further, we think central banks could cut rates …
2nd February 2016
Business surveys for January provide further evidence that global economic activity is holding up well in contrast to fears of a sharp downturn. Growth in China slowed early last year, but appears to have been stable in recent months. In the rest of the …
1st February 2016
We estimate that world GDP growth fell below 2% annualised in Q4 2015, its slowest pace in over three years. But growth should rebound to 3% or so this year, as China, Japan and the US regain some momentum and the downturn in commodity-exporting economies …
29th January 2016
Over the past few years, the governments of most advanced economies have made a lot of progress in repairing the damage caused to their public finances by the global financial crisis. The majority should not need to tighten fiscal policy much further in …
28th January 2016
This Focus addresses two of the biggest concerns which have undermined confidence in the global economy and markets this year: worries over China and the further slump in the oil price. While recognising the many risks, we remain more upbeat than most on …
27th January 2016
Another day, another record low for the Baltic Dry Index (BDI). However, while this measure of sea freight costs may be a helpful guide to the balance of supply and demand for certain commodities and the ships that carry them, there are other, much better …
The turmoil in global markets since the beginning of the year is not, in our view, a sign that the world economy is heading for a recession, but the fall in oil prices will have a knock-on effect on inflation. While not a “game-changer”, it has reinforced …
26th January 2016
Today’s Markit PMIs show manufacturing growth holding broadly steady in January, and provide no evidence of the collapse in economic activity that many seem to fear. … Flash Manufacturing PMIs …
22nd January 2016
The latest available data show that world trade growth slowed a bit further towards the end of 2015, but they do not point to a sharp downturn. What’s more, preliminary business surveys for January, which were published today, suggest that export orders …
Despite the prevailing gloom about the world economy, we think global growth will pick up from around 2½% last year to 3% in both 2016 and 2017, using our own estimates for China. Growth should be little changed in the US this year and will probably slow …
20th January 2016
The IMF today downgraded its forecasts for global growth this year and next, leaving them closer to our own. It also stressed that prospects for China have not deteriorated markedly in recent months, which has been a key theme in our research. Even so, we …
19th January 2016
Broad money and private sector credit have continued expanding steadily in recent months. In advanced economies as a whole, credit has been growing rapidly while in emerging economies it has slowed but only gradually over the past five years. Overall, …
15th January 2016
Suggestions that the global recovery is likely to run out of steam simply because the business cycle is now quite mature look wide of the mark. Indeed, the recoveries in most G7 economies are still in their infancy and the duration of expansions has …
14th January 2016
Based on our new oil price forecasts we expect inflation in advanced economies to rise more gradually this year than previously anticipated. This will add to pressure for further policy loosening in the euro-zone and Japan, but it should have less impact …
12th January 2016
In our view, China is likely to keep its currency broadly stable in trade-weighted terms in the coming months. However, if there were a large, across-the-board devaluation of the renminbi the fallout for the rest of the world would be negative, albeit not …
8th January 2016
Concerns about China’s economic prospects have rattled investors in the past few days. However, we think China’s economy will pick up in the coming months. Overall, the latest economic data do not point to a slowdown in activity, credit growth has …
7th January 2016
The final Markit manufacturing PMIs for December, which were published today, suggest that momentum was slowing at the end of last year. The euro-zone gained a bit more momentum, but this was outweighed by weakness in the US and China. … Global …
4th January 2016
