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At face value the plunge in commodity prices over the last year is consistent with a global recession as severe as that in 2008-09. However, this time it almost certainly is different. The latest commodity slump has mainly been driven by supply-side and …
20th August 2015
Fears of a period of widespread deflation look misplaced, in our view, despite the recent fall in oil prices and China’s devaluation. Domestic forces will continue to be the key drivers of inflation. These point to rising price pressures in the US but …
18th August 2015
China’s move to shore up the renminbi suggests that the exchange rate policy changes it announced earlier this week will have little lasting impact on the world economy. Nor will the small step towards a more market-determined exchange rate policy secure …
13th August 2015
The recent run of weak trade data has raised fresh concerns about the health of the global economy. However, the fall in the value of trade over the past year mostly reflects lower commodity prices and the appreciation of the dollar rather than a sharp …
11th August 2015
The declines in the cost of crude oil since May have revived concerns about global growth and deflation risks. However, the falls mainly reflect positive supply-side developments and are also small compared to those that have gone before. The impacts on …
10th August 2015
Global growth rebounded in the second quarter and the latest business surveys suggest that it has picked up further at the beginning of Q3. Growing fears of a hard landing in China have weighed on sentiment and pushed commodity prices lower over the past …
6th August 2015
July’s final manufacturing PMIs suggest that the world economy began the third quarter on a weak note. However, we expect global growth to hold up fairly well over the rest of the year as China’s growth rate stabilises and the US economy accelerates. … …
3rd August 2015
Even though the US Fed is likely to begin raising interest rates in September, global monetary conditions are set to remain ultra-loose over the coming years as a number of other central banks ease policy further. … Conditions to stay loose despite …
31st July 2015
The uneven pace of growth in the developed world is likely to lead to a sharper divergence in monetary policy than most anticipate by the end of 2016. US rates look set to increase further than markets expect, but several central banks elsewhere will …
27th July 2015
Preliminary business surveys suggest that global growth weakened further in July, butwe do not think that the world economy is heading for another major downturn. … Flash PMIs …
24th July 2015
World trade volumes fell sharply in May – the fourth monthly fall during the first five months of the year. This leaves trade growth lagging well behind the growth of GDP. Most of the slowdown has been due to a decline in exports from the emerging world. …
22nd July 2015
Fears of a prolonged period of falling prices in advanced economies have eased over the past few months as both inflation and inflation expectations have rebounded. Nevertheless, the conditions under which deflation can become entrenched, in particular …
20th July 2015
Real wages have typically fallen sharply after a major currency crisis and devaluation but have then begun recovering within a couple of years. The pace at which they have picked up has varied enormously. In some cases, there has also been a sharp rebound …
17th July 2015
Global growth rebounded in the second quarter and should pick up a bit further in the coming two years. In advanced economies, demand will be supported by low oil prices and improving consumer sentiment. Meanwhile, although the euro-zone crisis is far …
16th July 2015
In our view, the debate over whether Greek exit from the euro or the slump in China’s stock market poses the greater threat to the rest of the world is missing the point that neither actually has to be a big deal. But if forced to pick one or the other, …
10th July 2015
The fall in oil prices and the appreciation of the US dollar will cause global imbalances to widen over the coming years. China’s surplus could rise up the political agenda once more while the euro-zone’s growing surplus underlines how weak demand from …
9th July 2015
Beyond its impact on investor sentiment, which we expect to be temporary, the slump in China’s equity market is unlikely to have much effect on the global economy. Indeed, we doubt that it will even have much effect on the macroeconomic outlook for China …
8th July 2015
The global economy is likely to expand at a decent pace in the second half ofthe year, despite escalating tensions in Greece and the recent gyrations in China’s equity market. Business surveys have weakened a bit in the past few months but they, along …
3rd July 2015
Broad measures of the money supply are increasing at a decent pace in the major advanced economies, suggesting at face value that the global economic recovery remains on track. The biggest change over the past twelve months has been in the euro-zone, …
2nd July 2015
Final manufacturing surveys for June, published by Markit today, do not alter our view that global growth recovered in Q2. Admittedly, the global manufacturing PMI edged back down to 51.0, but on past form this is still consistent with world GDP growth of …
1st July 2015
Contrary to conventional wisdom, economic recoveries following a large devaluation have not always resulted from a surge in net exports. Instead, they have often been driven by rising consumption. This bodes well for Greek households if Greece eventually …
29th June 2015
If, as seems increasingly likely, Greece defaults and exits the euro-zone within the coming months, the implications for the world economy should be fairly modest. Indeed, it could even turn out to be a positive development, as the euro-zone and Greece …
Until recently there was a lot of scepticism that central banks would be able to set policy rates below zero. But in practice, the introduction of negative policy rates by four European central banks over the past year has been relatively straightforward. …
25th June 2015
World trade volumes edged up in April, but this follows a run of very weak data and left the year-on-year growth rate at a historically low pace. Stronger global growth during the rest of the year should lift world trade to some extent, but it looks set …
24th June 2015
Having declined in lock-step with one another over the past three and a half years, we think the unemployment rate is likely fall more rapidly in the US than in the UK between now and the end of 2017. This suggests that interest rates will rise more …
Preliminary business surveys for June still suggest that global growth will rebound following a weak start to the year. However, the recovery is set to remain uneven, with growth in the US (and UK) likely to be strong over the rest of this year and next …
23rd June 2015
Devaluations have generally had a more positive impact on growth in economies which have a lot of spare capacity, where monetary conditions have been excessively tight and where a debt write-off is needed. All of these conditions were true of Russia in …
18th June 2015
Yesterday’s FOMC statement and interest rate projections suggest that the US Fed is still on track to begin raising rates in September. Nevertheless, broader monetary conditions should remain highly accommodative as policy elsewhere is eased and the …
Headline inflation looks certain to rebound sharply in most advanced economies during the coming months as the impact of last year’s oil price slump unwinds. Looking further ahead, faster wage growth should push core inflation in the US above the Fed’s 2% …
12th June 2015
At first sight, the concept of a sovereign default appears straightforward: a government either pays its debt, or it does not. But on closer inspection the picture is more blurred. For example, Greece’s plan to delay its payments to the IMF would not …
5th June 2015
The rebound in global oil prices since January means it is all but certain that headline inflation in advanced economies will pick up sharply towards the end of the year. For most countries, this has further eased fears of a prolonged bout of deflation. …
4th June 2015
Crude oil prices appear to be settling in a range of $60 to $70 per barrel, which we regard as ideal (a “Goldilocks” scenario) for the global economy. Prices are high enough to ease the pressure on key producers, encouraging OPEC to retain its current …
3rd June 2015
Although both sovereign and corporate bond yields in advanced economies rose in early May, they remain low by past standards. And with most central banks likely to maintain ultra-loose policy this year and next, global monetary conditions will stay highly …
Final manufacturing surveys for May, published by Markit today, provide some reassurance that global growth should continue at a respectable pace this year. Among the advanced economies, prospects still look brightest for the US and the UK, while the …
1st June 2015
So far this year, households in advanced economies do not seem to have been spending their windfall from lower oil prices. However, this is partly because they stepped up their consumption late last year and partly because some price cuts are yet to take …
Two themes are likely to dominate global monetary policy over the next couple of years. First, policy in advanced economies in aggregate looks set to remain ultra-loose as the ECB and BoJ persist with QE. And second, the US Fed is likely to raise rates …
29th May 2015
It is only a matter of time before China passes another milestone as the renminbi is added to the basket of currencies which determine the value of the IMF’s special drawing right. However, we doubt that this will take place this year. What’s more, when …
26th May 2015
The sharp slowdown in trade growth since the start of the year partly reflects the weakening in the world economy in the first quarter. However, trade has also been depressed by a series of temporary factors over the past few months which are likely to be …
22nd May 2015
Preliminary PMIs for May, which were published today, support our view that global growth is likely to pick up after a soft patch at the beginning of the year. We still think activity will rebound strongly in the US, but we expect growth to remain …
21st May 2015
The past four years have seen the slowest pace of global economic integration since the Second World War. With trade talks stalled and most parts of the world already integrated into the global economy, trade growth is likely to remain subdued over the …
18th May 2015
We can all be caught up in the mood of the moment, but talk of a “rout” in bond markets is, at best, premature. Yields are still remarkably low by past standards. While they may rise further, notably in the US, this should generally be in tandem with …
13th May 2015
Consumers in advanced economies have so far opted to save, rather than spend, their oil windfall. However, strengthening labour markets, buoyant asset prices, and high consumer confidence all point to households spending more freely over the coming …
12th May 2015
Oil prices have recovered to levels that should still provide a major boost to consumers, while easing the pressure on producers. However, further increases could undermine the recovery in weaker economies, notably the euro-zone, especially if they …
7th May 2015
GDP growth was faster in the euro-zone than in the US in Q1, but we don’t expect this to be the start of a new trend. The single currency area has received a temporary boost from the fall in the euro as well as from lower oil prices. In the US, however, …
In theory the structural budget balance, which takes account of whether an economy is running above or below its potential level, provides a useful summary of a government’s fiscal position. On this basis much of the euro-zone is in a stronger fiscal …
6th May 2015
The weakness of the US and China in Q1 and some softer data elsewhere have led to suggestions that a broad-based global slowdown is now underway. We think that is not the case. Growth has held up well in many other countries and it should rebound in the …
1st May 2015
Global monetary conditions remain highly accommodative as the world’s major central banks have kept policy rates close to zero and some have continued with large scale asset purchases. Conditions in the euro-zone have improved significantly in the past …
30th April 2015
Signs that price pressures have picked up a bit during the past month or two have prompted some to suggest that the threat of deflation has vanished almost as suddenly as it appeared. We disagree. In the US and UK, headline inflation was always likely to …
27th April 2015
Over the past four years the volume of world trade has grown at a much slower pace than prior to the financial crisis. Recent downward revisions to WTO forecasts show that the international organisations are beginning to come round to our view that the …
23rd April 2015
Business surveys released today suggest that the world’s four largest economies slowed in April. But global growth has not collapsed. Indeed, our flash global manufacturing PMI still points to a solid expansion in the world economy, despite slowing …
