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The slump in the oil price means that headline inflation is likely to turn negative in the coming months in many advanced economies, just as it already has in the euro-zone. In general, deflation in consumer prices should be positive for economic growth. …
7th January 2015
Business surveys indicate that global growth slowed further in December. But the slowdown was not as steep as suggested by some media reports, nor is it sufficient to justify the slump in oil prices. With cheaper oil set to boost demand, we expect global …
6th January 2015
The collapse in oil prices looks set to wipe out the Gulf’s external surpluses next year, leaving China and the euro-zone as the world’s major surplus economies. At the same time, the US deficit looks set to narrow even further. While the distribution of …
23rd December 2014
We expect 2015 to be another year of large divergences in the performances of the advanced economies, with the US and the UK leading the pack and the euro-zone and Japan continuing to struggle. But diverging policy responses could reverse the rankings …
Although the Fed and BoE are likely to start raising rates by the middle of 2015, global monetary conditions should remain very loose next year. The ECB is gearing up to announce a “full-blown” QE programme, perhaps as soon as January, and central banks …
Growth in the volume of world trade slowed again in October. The latest slump in the price of crude oil has not yet fed through to trade data. But when it does so, big changes in the value of trade and current account balances are likely to appear. … …
19th December 2014
The Swiss National Bank introduced a negative deposit rate yesterday, but its main tool to combat the threat of deflation is a ceiling for the Swiss franc. Given the continued threat of deflation and capital flows into safe havens, both Switzerland and …
Today’s flash manufacturing PMIs suggest that the pace of global growth has cooled a little further in recent weeks. Nonetheless, the slowdown since the summer has been milder than the tone of media reports would suggest and is certainly not sharp enough …
18th December 2014
Most countries (and the world as a whole) should be better off as a result of the slump in oil prices, including key emerging markets such as China and India. Of the major advanced economies, Japan is the biggest winner, although there should also be …
17th December 2014
The dramatic escalation of Russia’s crisis over the past twenty four hours is clearly not good news for the world economy. Nonetheless, both trade and financial links between Russia and the rest of the world remain too small for Russia’s plight to have …
16th December 2014
The slump in oil prices to $60 per barrel should be a clear net gain for the world economy. Indeed, the potential boost to global demand is one important reason to expect prices to level out soon. Nonetheless, further falls – say to $40 – could see the …
15th December 2014
The average inflation rate in the G7 is likely to fall to only around 1% next year because of the collapse in oil prices. A growing number of economies will experience a period of outright deflation. However, even if the price of Brent crude remains in …
11th December 2014
The collapse in global oil prices since June should directly benefit consumers in advanced economies by more than $200bn a year, or around 0.8% of their overall consumption. But the gains will be concentrated in the US, exacerbating the gulf in …
5th December 2014
Global growth has cooled a bit in recent months. The expansion in the US and UK has continued, but China’s economy has slowed further, the euro-zone is stagnant and Japan is in recession. Looking forward, the $45 slump in the price of Brent crude since …
4th December 2014
The latest slump in the oil price has wreaked havoc on some emerging economies and has taken a toll on the share prices of energy firms. Nonetheless, cheaper oil is still a net positive for global GDP because of the much larger boost it will give to oil …
2nd December 2014
Final manufacturing PMIs for November confirm that global growth is slowing, with activity weaker in the euro-zone, Japan and China. However, the further slump in the oil price, to around $70 per barrel, and continued strength of the US mean that fears of …
1st December 2014
Three of the world’s most powerful central banks have loosened monetary policy in some form in the past few weeks and they all look likely to do more next year, particularly given the recent slump in oil prices. This may provide a modest boost to activity …
Although the Fed ended its asset purchases in October, and is set to start raising policy rates in the coming months, global monetary conditions will remain ultra-loose as the ECB and BoJ undertake further easing. … ECB to join Bank of Japan in …
28th November 2014
The drop in global commodity prices, coupled with a slowdown in global growth, will push headline inflation rates in a number of economies into negative territory. But, other than Japan, the risk of a prolonged and damaging period of deflation is …
27th November 2014
Data for September showed the biggest monthly rise in world trade in over two years. What’s more, there was some progress on multilateral trade negotiations at the G-20 Brisbane summit. However, there are a number of reasons why the latest surge in world …
25th November 2014
Business surveys, such as the Purchasing Managers’ Indices published by Markit, provide a timely guide to the health of individual economies, but they are not directly comparable across countries. In this Focus , we adjust the PMIs based on their past …
24th November 2014
Today’s flash manufacturing PMIs suggest that the world economy is not growing as rapidly as it was in the third quarter. Nonetheless, the slowdown has been more gradual than many commentators have suggested, and the pace of global growth remains fairly …
20th November 2014
If and when the ECB implements “full-blown QE”, there may be some positive spillovers for the rest of the world, but they would not be large. Countries elsewhere in Europe would benefit most from stronger euro-zone growth, but this may be offset by upward …
18th November 2014
This weekend’s summit should end with pledges by individual G20 governments to implement reforms designed to boost growth. Even if little of this is new, the focus on growth is preferable to the wrangles over fiscal and monetary policy which have marred …
13th November 2014
Russia’s economic prospects are going from bad to worse, but barring a major escalation of geopolitical tensions, the effects beyond central and eastern Europe should be modest. The world’s largest economies have limited trade or financial exposure to …
11th November 2014
Although co-ordinated exchange rate intervention is taboo at present, it has been attempted in the past and could, in principle, be tried again in future. Admittedly, both the political and economic hurdles to such an agreement are greater than they were …
7th November 2014
Global growth appears to have softened at the beginning of the fourth quarter. The stagnation in the euro-zone has continued and Japan has still not recovered from the effects of April’s consumption tax hike. Nonetheless, business surveys for October …
6th November 2014
The collapse in oil prices over the past few months will not transform the outlook for the world economy, but it should act as an “automatic stabiliser”, providing some reassurance to those fearing the worst. If, for example, the price of Brent settles at …
4th November 2014
Final manufacturing PMIs for October suggest that global growth may be slowing a little at the start of Q4, dragged down by the euro-zone’s chronic problems. But the US and UK continue to perform well. … Manufacturing PMIs point to slightly weaker …
3rd November 2014
The turbulence in financial markets in the middle of October won’t have a major impact on monetary policy in developed economies. We do not think it is a sign that the world is heading for another recession. Even the slump in oil prices, which we suspect …
30th October 2014
The likely end of the Fed’s asset purchases under QE3 does little to change the bigger picture that global monetary conditions remain very loose. … Monetary conditions set to remain …
29th October 2014
The Ebola crisis is, above all, an appalling tragedy for the communities affected, but the global economic and market impact is likely to be limited. The West African economies at the centre of the crisis are much smaller and also less internationalised …
27th October 2014
World trade contracted in August, and more timely data suggest that it has continued to fare badly since then. But rather than being another sign that the global economy has stalled, the slowdown in world trade better reflects more structural factors …
24th October 2014
Today’s flash manufacturing PMIs suggest that the pace of global growth barely slowed in October, and thus should help to calm fears that the global economy is shuddering to a halt. However, they still point to very uneven growth, underlining that the …
23rd October 2014
There have been renewed calls for a relaxation offiscal austerity during the past month or so,primarily aimed at the surplus countries and, inparticular, at Germany. However, Germany’sgovernment clearly intends to plough on with itsbalanced budget …
21st October 2014
Although economic sanctions can have a devastating effect in some circumstances, their impact is more often fairly limited, even on the targeted country. In most cases sanctions are not intended to inflict the maximum possible economic damage. And even …
20th October 2014
The recent drop in oil prices is widely assumed to have strengthened the case for monetary policy remaining looser for longer. However, while we think it may encourage the ECB to loosen monetary policy further, it should make much less difference for the …
17th October 2014
Global growth is likely to remain well below its pre-crisis average for at least the next couple of years. However, while prospects for the euro-zone have gone from bad to worse, the outlook for the world as a whole has not changed much during the past …
15th October 2014
Global growth is likely to accelerate slightly next year but to remain well below its pre-crisis average. Strong recoveries in the US and UK will be offset by near-stagnation in the eurozone and Japan. Lower commodity prices should drag headline inflation …
It would be unusual for inflation pressures to be building in some advanced economies and falling in others. Nonetheless, this is exactly what we expect to happen in the next year or two, as US inflation picks up while the euro-zone teeters on the brink …
13th October 2014
Although they have their drawbacks, business surveys – such as those published by Markit – are the most reliable guide to the state of global economic activity. The fact that they continue to point to steady growth is strong evidence that fears the …
The IMF’s latest fiscal assessment, published yesterday, suggests that the period of acute austerity has now passed for advanced economies in aggregate. But public debt is still far too high, particularly in Japan and some euro-zone countries. … Public …
9th October 2014
Geopolitical risks have grabbed the headlines recently and have been cited as a key factor depressing global economic prospects. However, the military conflicts which have attracted most attention pose less of a threat to the world economy than more …
6th October 2014
Although global growth should be a little faster in the second half of the year than the first, it is unlikely to continue rising in the coming quarters. Admittedly, the US looks set for a sustained expansion, even though the Fed will probably begin …
3rd October 2014
Business surveys published today underline that growth in the euro-zone is slowing whereas the US economy remains strong. They also confirm that there has been a sharp slowdown in the UK’s manufacturing sector, and suggest that Japan’s economy may not …
1st October 2014
Although the US Fed is set to announce the end of its asset purchases in late October, global monetary conditions should remain highly accommodative. … Fed ending QE3 but global policy still …
30th September 2014
Rather than being a sign that global growth is faltering, the recent decline in international oil prices mainly reflects improving supply conditions. As such, it should provide a modest boost to global demand. It will also help to keep headline inflation …
29th September 2014
Although the Fed is about to end its asset purchases, quantitative easing in the world as a whole still has a long way to go. The BoJ has already been buying assets on a larger scale than the Fed for the past six months, and it looks increasingly likely …
26th September 2014
There was a slight pick-up in world trade in June and July, which is consistent with our view that global growth recovered in the current quarter. Nonetheless, trade is still expanding relatively slowly by past standards, and no faster than world GDP. … …
25th September 2014
A composite of the flash manufacturing PMIs released so far suggests that the pace of global growthaccelerated in the third quarter, despite more signs of weakness in the euro-zone and Japan. … Global growth set to strengthen in …
24th September 2014
