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China’s growth rate is set to slow a little further in the coming years. This will have a significant knock-on effect on some other emerging economies, but we think its overall impact on growth in the rest of the world should be fairly modest. … Further …
21st April 2015
One of the most disappointing features of advanced economies in recent years has been the weakness of investment. In part, this is because investment tends to mirror the performance of the economy as a whole. But the legacy of overinvestment in housing …
20th April 2015
The pace of global growth slowed in the first quarter, but it is likely to recover during the rest of the year and in 2016. The windfall gains from lower oil prices, rising employment and continued loose monetary conditions will feed through to stronger …
17th April 2015
The IMF is making headlines with its forecast that the world economy faces a “new reality” of lower potential growth during the coming years. But arguably, it is the IMF which is catching up with reality. Global growth slowed several years ago and does …
14th April 2015
Quantitative easing in the euro-zone and Japan has provided a big boost to equity markets which in turn should bolster household wealth. But barring a major recovery in the housing market, the impact of wealth effects on consumption in both economies is …
9th April 2015
For a second successive year, global GDP growth dropped sharply in Q1 due to a slowdown in the US and China. But business surveys, which may be a better gauge of the underlying health of the economy, suggest that activity has, if anything, strengthened …
8th April 2015
Although the asset purchase programme announced by the ECB this year is smaller than that announced by the Bank of Japan in 2013, the initial response of financial markets has, if anything, been larger. However, this may not be a good indicator of how …
3rd April 2015
It is now clear that there was a sharp drop in global growth in the first quarter of 2015. But activity is likely to rebound in the second and third quarters, just as it did last year. Indeed, the pace of world GDP growth in the year as a whole will …
2nd April 2015
The launch of “full blown” quantitative easing by the ECB this year has been greeted enthusiastically by financial markets. However, the global track record of QE since it was first adopted by the Bank of Japan in 2001 suggests that, while it is sometimes …
1st April 2015
Broad money growth in the euro-zone has accelerated to its fastest rate since April 2009, supporting other evidence that the recovery there is gaining some momentum. Meanwhile, the pick-up in broad money growth in the US indicates that its underlying …
31st March 2015
The path of monetary policy in the US and UK is unlikely to change significantly because of the recent appreciation of the dollar and the pound. Admittedly, the strength of these currencies is one reason why the “lift-off” may be a little later than …
27th March 2015
World trade volumes fell in January, following an increase the previous month. Looking ahead, a number of factors suggest that the growth of world trade may pick up a bit in the coming months, but we don’t expect it to return to pre-crisis levels. … World …
24th March 2015
Preliminary business surveys published today suggest that the pace of global growth in Q1 was little changed from the end of last year. But this is partly due to weather-related disruption in the US and a sharp slowdown in China, while activity in the …
Concerns about the global impact of tighter Fed policy are likely to resurface later this year, but we think these worries are exaggerated. Even if rates are hiked, US monetary policy will remain loose by past standards, while other major central banks …
19th March 2015
Concerns about the possible negative side effects for the rest of the world from QE by the ECB look overdone. Admittedly, the appreciation of other currencies against the euro will be a headwind for exporters elsewhere, but this effect should be small and …
17th March 2015
Some indicators suggest that the euro-zone economy may grow faster than the US in Q1. But this is largely because unusually severe weather has hit US activity. While the euro-zone economy has gained some momentum, growth will almost certainly remain …
16th March 2015
Many advanced economies will experience several months of negative headline inflation this year as a result of the plunge in oil prices, but few are at risk of a prolonged or damaging bout of deflation. In the US and UK, where economic growth should …
12th March 2015
The surge in the US dollar to multi-year highs has triggered many worries, including the threat to the US recovery, heightened risks of global deflation via the impact on commodity prices, and the potential damage to emerging economies. All of these fears …
The ECB started its quantitative easing programme this week and the US Fed is likely to begin tightening policy in June. Nonetheless, we expect real interest rates to remain higher in the euro-zone than in the US or even Japan, at least for the next year …
10th March 2015
Household spending has picked up sharply in response to the collapse in oil prices. In January, the growth rate of underlying retail sales in advanced economies reached its highest level since 2006. Even consumers in the euro-zone are participating in the …
5th March 2015
With the WTO talks stalled, hopes for significant progress in trade liberalisation are pinned on two large regional trade and investment pacts. As a result of renewed political pressures for an agreement, there now appears to be some chance of a …
4th March 2015
Final manufacturing PMIs for February suggest that the pace of global growth has picked up a bit since the start of the year. The full impact of the drop in oil prices has yet to be felt and further loosening by a number of central banks should support …
2nd March 2015
There has been a wave of rate cuts across the world since the start of the year. And we expect monetary policy to be loosened further in a number of economies over the coming months. This should help to keep global monetary conditions highly …
27th February 2015
Sweden’s Riksbank cut interest rates into negative territory this month, following in the footsteps of the Danish and Swiss central banks and the ECB. Although central bankers are instinctively cautious in setting policy, rates are likely to be cut even …
26th February 2015
The volume of world trade rebounded in December, but for the fourth quarter as a whole it rose only in line with global GDP. More recent data indicate that the gradual recovery in exports from the euro-zone and Japan continued early this year. … Exports …
24th February 2015
Preliminary business surveys published today suggest that activity has picked up a bit in the euro-zone and remained solid in the US. However, the Greek crisis poses a growing threat to the outlook. … Risk of “Grexit” casts a shadow over global growth …
20th February 2015
If Greece is forced out of the single currency there would clearly be major political and economic implications for the euro-zone itself, and we suspect there would initially be turmoil in global financial markets too. But the economic impact on the …
19th February 2015
The drop in global oil prices since mid-2014 will push many advanced economies into deflation, but the trough will vary considerably between economies. And while inflation should rebound rapidly in the US and UK, the risk that deflation becomes ingrained …
18th February 2015
Although real household incomes among net consumers have been boosted by the fall in oil prices, this has yet to translate into a surge in spending. But we still expect consumption in advanced economies to grow rapidly this year. … Are consumers …
16th February 2015
Suggestions that China or Russia might come to Greece’s rescue are wishful thinking as it is not in the economic or political interests of either country to do so. Nor is it likely that the US will offer anything other than diplomatic support, although …
12th February 2015
It is often claimed that the world is “awash with debt” and that there has been little, if any, progress with deleveraging since the global financial crisis. But in reality, the picture is more mixed. The US and UK have significantly reduced private …
11th February 2015
With Greece once more dominating the headlines, officials from the US and elsewhere are likely to have used the G20 meeting in Istanbul to urge euro-zone governments to do all they can to prevent the crisis from spiralling out of control. However, the …
9th February 2015
If they are sustained, the recent sharp falls in government bond yields will be most helpful for the fiscal positions of southern euro-zone countries such as Italy and Spain. But along with Japan, these countries are also the most vulnerable to any …
6th February 2015
After slowing in the second half of last year, global growth is likely to gather pace again in the coming quarters. Admittedly, the drop in oil prices since last summer has prompted energy companies to cut investment, and has wreaked havoc in some …
5th February 2015
The recent pick-up in oil prices has the potential to develop into a “Goldilocks” scenario: prices high enough to keep most oil producers in business, but low enough to provide a substantial boost to global economic activity. Consistent with this …
4th February 2015
Final manufacturing PMIs for January suggest that global growth may have stabilised. The outlook for the euro-zone has deteriorated and growth in China has slowed. But prospects for the US are bright, while lower oil prices, and easier monetary policy in …
2nd February 2015
The latest fall in the Baltic Dry Index (BDI), taking it to its lowest level since 1986, has added to concerns about the health of global demand. But the BDI is best viewed simply as a guide to the balance of supply and demand for cargo ships, rather than …
The collapse in oil prices will, of course, have a big negative impact on the fiscal positions of the world’s major oil producers. But countries with large fiscal buffers, including the Gulf economies and Norway, are well placed to cope, whereas others, …
30th January 2015
The latest monetary easing in Europe and Asia has revived talk of “currency wars” and fuelled concerns about the impact of dollar strength on the US economy. But much of this talk seems unduly negative. … More to cheer than fear from “currency …
29th January 2015
Any doubts about whether monetary conditions would remain ultra-loose this year have been put to rest by the ECB’s decision to launch “full-blown” QE and the wave of rate cuts implemented during the past few weeks. The further fall in oil prices and …
28th January 2015
Market-based measures of inflation expectations have declined in the major advanced economies over the past few months. However, the economic risks posed by an extended period of very low inflation or outright deflation are much greater for the euro-zone …
27th January 2015
The collapse in oil prices is likely to have a much larger impact on world trade than the depreciation of the euro – even if yesterday’s decision by the ECB to launch “full-blown QE” leads to further currency weakness. … Plunge in oil prices to …
23rd January 2015
Today’s flash manufacturing PMIs may be the first sign that the world economy is starting to reap the benefits of lower oil prices. They should also allay fears that the world economy is slipping into a major downturn, as it did in 2011-12. … Global …
Central banks in several economies have loosened monetary policy this week and there is likely to be further easing to come. However, there are some exceptions among emerging markets, and we still think the US Fed and, probably, the Bank of England will …
22nd January 2015
Global growth has slowed in recent months, but we still expect world GDP to expand by just over 3% this year and next. The slump in oil prices should have a positive impact overall, even though it will impose significant costs on net oil exporters. Lower …
21st January 2015
The IMF’s latest forecasts for the world economy contain little new news because most of the changes reflect the Fund catching up with other forecasters since its last update in October. Although we agree with the IMF that the collapse in oil prices is a …
20th January 2015
Headline inflation is set to be well below zero for the bulk of this year in many advanced economies, including the US and the euro-zone, and we think it will probably dip below zero in the UK and Japan. For the US and UK, this is good news as its main …
15th January 2015
The sharp overnight fall in copper prices seems to have been driven by investor panic rather than a sudden deterioration in fundamentals and, as such, it could swiftly be reversed. Admittedly, copper’s reputation as a bellwether for the health of the …
14th January 2015
Whether or not Syriza forms its next government, Greece is unlikely to default on its bail-out loans from the IMF. However, if it does so, the political fallout for the IMF itself would be serious. … How might debt restructuring by Greece affect the …
12th January 2015
The slump in oil prices, along with renewed concerns about Greece, have taken a toll on investor confidence in the past week or so, causing equity markets to fall and demand for safe-haven assets to rise. This partly reflects concerns about the impact of …
8th January 2015
