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The Bank of Canada may end up reversing the rate hike it made yesterday. But central banks elsewhere are likely to begin raising rates over the next year or two and are less likely to reverse course. Their economies are approaching full capacity and are …
13th July 2017
Germany’s current account surplus has been quite stable in recent years and has not, therefore, been a major drag on global demand. That said, in the unlikely event that it significantly eases up on fiscal policy, Germany could help to boost global demand …
11th July 2017
Labour market data released in the US and Japan today underline that wage inflation remains elusive throughout the developed world. We still think that average earnings growth is likely to pick up in the US and UK, eventually, but that it will probably …
7th July 2017
Advanced economies grew fairly rapidly in the second quarter, with GDP growth likely to have rebounded strongly in the US, Japan and the UK and to have accelerated a little in the euro-zone. This in turn has led to a further reduction in the aggregate …
6th July 2017
Few observers will be expecting any policy breakthroughs at the G20 leaders’ summit in Hamburg this weekend, given the US administration’s scepticism about multilateral cooperation. But for now it still seems likely that the world will avoid sliding into …
It is widely thought that recessions are generally triggered by central banks stepping on the brakes in response to rising inflation. But many recessions have not been preceded by an increase in inflation, particularly since the 1980s. This suggests that …
4th July 2017
The purchasing managers’ indices for June provide further evidence that a broad-based pick-up in economic activity is underway in advanced economies, but that it is not generally feeding through to a sustained rise in inflation. … Global Manufacturing PMI …
3rd July 2017
We expect government bond yields to rise further during the coming months than they have done in the past couple of days. But rather than causing growth to slow, higher bond yields will be a sign that global economic prospects have improved and fears of …
30th June 2017
Recent developments have underlined that the banking sector is far better capitalised in the US than in the euro-zone. But the more important point is that the financial sector has strengthened in nearly all advanced economies in recent years, and should …
29th June 2017
We still think the US Fed is likely to raise interest rates two more times this year and to start gradually shrinking its balance sheet in Q4. But the ECB will probably not start tapering its asset purchases until next year and will leave interest rate on …
28th June 2017
After slowing sharply in the first quarter, household spending growth appears to have rebounded in the second. A combination of strong labour markets, low household debt burdens and steady growth of consumer credit means that the outlook for consumer …
26th June 2017
Although the latest CPB data suggest that global trade growth slipped at the start of the second quarter, we doubt that this marks the start of a sustained downturn. Indeed, more timely evidence indicates that trade volumes have been rising at a steady …
23rd June 2017
Preliminary PMIs, which were published by Markit today, suggest that the recovery in advanced economies continued strongly in June. … Flash PMIs …
Janet Yellen’s remarks about the case for reconsidering the Fed’s inflation target have generated some attention this week. But in practice, there is little prospect of the inflation target being raised in the near future, either in the US or in any other …
22nd June 2017
Even though the US Fed will start to reduce its asset holdings, probably in Q4, global monetary conditions are set to remain accommodative for a while yet. Meanwhile, growth in bank lending in advanced economies should continue to hold up well. … …
21st June 2017
It is often assumed that monetary policy is highly accommodative simply because nominal interest rates are very low. But if the neutral real interest rate has fallen, monetary policy may not be as loose as it appears. This is especially true of economies …
20th June 2017
The Fed’s decision to raise interest rates again yesterday does not change the big picture that global monetary policy will remain highly accommodative. We expect policy rates to stay close to zero in the euro-zone and Japan for the next two years, and …
15th June 2017
In each of the past three years, all of the G7 group of advanced economies have posted positive GDP growth. We expect these expansions to continue until at least 2019, which would be the third-longest period during which they have all grown simultaneously …
14th June 2017
The average inflation rate in advanced economies is likely to be close to 2% this year and next as the world economy expands steadily and key commodity prices remain fairly stable. Despite weaker CPI numbers recently, the US inflation rate should inch up …
13th June 2017
The unemployment rate in most advanced economies is now lower than it was on the eve of the financial crisis. However, the “natural” rate of unemployment has probably fallen and the supply of labour may be more elastic than it was in the past. As such, …
7th June 2017
Global economic growth is likely to pick up a bit in the second quarter, led by household consumption, which is being boosted by an upturn in consumer confidence. The recovery continues to be broad-based as the euro-zone and Japan, which have been weak …
5th June 2017
The final PMIs for May point to a further pick-up in growth in the euro-zone, led by Germany, and to steady or accelerating growth in most other advanced economies. … Global Manufacturing PMI …
1st June 2017
The US Fed is likely to raise interest rates in June and to begin a very gradual process of balance sheet normalisation before the end of the year. But other major central banks are a long way behind. We expect the ECB to change its forward guidance …
26th May 2017
News that the Fed will proceed very cautiously in scaling back its huge balance sheet does not change our view that US monetary policy will be tightened more rapidly than the markets anticipate this year and next – and that the world economy should be …
25th May 2017
The CPB’s latest figures confirm what other indicators had suggested – that world trade experienced fairly rapid growth in Q1. And the signs are that this momentum has spilled over into Q2, albeit at not quite as fast a pace. Data published today by the …
24th May 2017
The conflicting signals given by business surveys and national accounts during the first few months of the year mean that we cannot have absolute confidence in either. But we suspect that the PMIs, which have painted a rosier picture, still provide the …
Preliminary surveys suggest that manufacturing conditions in advanced economies are in good shape and point to a rebound in economic growth in Q2. … Flash PMIs …
23rd May 2017
While there are encouraging signs that the euro-zone is becoming less of a drag on the global economy, there are reasons not to expect a substantial boost from the region. … Is the euro-zone about to boost the global …
17th May 2017
Credit growth has slowed sharply in the US in recent months, due to weaker demand for bank loans from households and non-financial companies. However, in most other advanced economies it is rising steadily, and even in the US it has not collapsed. … …
16th May 2017
Oil prices jumped today following the announcement by Saudi Arabia and Russia that they favour extending the current production cuts until March 2018. Although this is not a game-changer for the oil market, it should help to keep prices in a range which …
15th May 2017
There is a widespread view that the world is in a period of “reflation” in which both economic activity and inflation are picking up. But there is little or no evidence of a sustained increase in underlying inflation, and we doubt that core inflation will …
11th May 2017
It is often claimed that the current expansion has lasted so long that a recession must be just around the corner. But history suggests that there is no such hard-and-fast rule. … Is the G7 due a …
Despite the criticisms levelled at them over the past year, central banks are not likely to be stripped of their independence anytime soon, or have their mandates radically changed. Politicians who were most critical in opposition have been quiet on the …
10th May 2017
The slowdown in China which now appears to be underway may prompt periodic bouts of nerves in financial and commodity markets. But we expect China’s growth rate to slow only gradually, rather than to collapse, which means that the economic fallout for the …
8th May 2017
Global economic growth slowed in the first quarter, but we expect it to rebound in the second. The US economy looks set to regain momentum as consumption seems almost certain to pick up. Meanwhile, growth in the euro-zone was already quite strong in the …
4th May 2017
Despite the dip in survey data in April, global manufacturing conditions are still in good shape. We expect world GDP growth to rebound in Q2 following a weak first quarter. … Global Manufacturing PMI …
2nd May 2017
Global growth slowed quite sharply in the first quarter of 2017, largely due to weaker activity in China and the US. However, we expect growth in the world as a whole to rebound in Q2. … Global growth likely to rebound after weak …
28th April 2017
Despite the pick-up in global growth in the past few months, most of the world’s major central banks are likely to leave policy highly accommodative this year. The ECB may tweak the language in its policy statement in June, but we don’t think it will …
27th April 2017
We expect aggregate fiscal policy in advanced economies to be loosened slightly in the coming year or two. President Trump will not succeed in passing the “phenomenal” tax cuts which he has promised, but he is still likely to get agreement on a reasonably …
26th April 2017
Although the CPB’s latest figures suggest that world trade volumes fell in February, these estimates are often subject to hefty revisions, and the three-month average growth rate remains quite encouraging. Moreover, early indications are that trade has …
25th April 2017
Preliminary PMIs, which were published by Markit today, suggest that the recovery in advanced economies continued in April. … Flash PMIs …
21st April 2017
Consumer confidence has risen in recent months in much of the developed world. This bodes well for household spending and global growth prospects. Consumer confidence indices are usually composites of a variety of sub-indices derived from responses to …
20th April 2017
The recent decline in global inflation expectations has reflected some benign news both on inflation itself and on its key drivers. But even if inflation expectations fall further, markets should be careful about what conclusions they draw on the …
19th April 2017
The IMF’s latest projections for global growth, published today, are in line with ours (using official figures for China) and point to healthy global GDP growth of about 3½% in the coming year or two. … IMF’s forecasts reflect a bright economic …
18th April 2017
Geopolitical concerns have boosted demand for safe-haven assets in the past week, and have pushed up measures of implied volatility in equity markets. But experience suggests that geopolitical events rarely have long-lasting economic consequences and the …
13th April 2017
Global monetary conditions remain supportive for the world economy. In the four major advanced economies, bank lending to both households and non-financial companies is expanding steadily, and interest rates are set to stay very low. … Money and credit …
Global growth has picked up in recent months and looks set to be fairly strong for the next two years. The US economy has a lot of momentum even without the planned fiscal stimulus, and prospects for the euro-zone have brightened despite political …
11th April 2017
Upbeat economic data for the first quarter of the year have prompted us to raise our forecasts for growth in several economies. But underlying wage and price pressures remain exceptionally low outside the US, meaning that central banks other than the Fed …
7th April 2017
Aggregate measures of credit growth in advanced economies have slowed sharply in the past month or two. But this is almost entirely due to weakness in the US, which we do not expect to last. What’s more, a range of other indicators suggest that the …
6th April 2017
The world economy has entered the second quarter in good shape. Business surveys edged higher in March and point to strong global growth in Q1. Consumer confidence in advanced economies has risen to a ten-year high, consistent with a big increase in …
5th April 2017
