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Bond yields and interest rate expectations have declined during the past few weeks. Moreover, our measure of the monetary base in advanced economies has expanded further as the Fed and BoJ have persisted with their asset purchase programmes. Nonetheless, …
20th May 2014
In the majority of advanced economies, policymakers allow the exchange rate to be determined by the currency markets. We think they are likely to continue doing so for the foreseeable future, for several reasons. First, there is not currently a strong …
19th May 2014
GDP data published today show Japan joining Canada, the US, Germany and France in regaining their pre-crisis levels of output. With the UK nearly there too, Italy is the clear laggard among the G7. … Explaining the divergence between the G7 …
15th May 2014
House price developments have raised concerns on both sides of the Atlantic recently. The worry is that the housing market may be overheating in the UK but cooling in the US. For now, though, we don’t think either poses a major threat to the broader …
9th May 2014
The US is enjoying a strong rebound after its weather-induced slowdown, the UK has extended its period of rapid growth into Q2 and the recovery in the euro-zone has gained momentum. On the other hand, activity in Japan seems to have slumped in April due …
7th May 2014
With the world economy gradually recovering, it is tempting to assume that there will be a global monetary policy tightening cycle in the coming years. However, we think US interest rates will return to ‘‘normal’’ levels fairly rapidly after 2015 but …
6th May 2014
The significance of revised purchasing power parity estimates, which suggest that China’s total GDP may overtake that of the US as soon as this year, is not as great as some of the headlines imply. For a start, GDP in isolation is a poor measure of …
30th April 2014
A speech by Mario Draghi last week suggested that it is increasingly likely that the ECB will begin publishing the minutes of its Governing Council meetings in the near future. This would bring it into line with the other major central banks. However, …
29th April 2014
We have already written extensively on the crisis in Ukraine and its potential economic and market impacts. (The most relevant publications are listed on page 2.) But as the crisis is back in the headlines again, this Update provides a brief summary of …
28th April 2014
World trade appears to have been sluggish throughout the first quarter of 2014, despite evidence that economic activity picked up. This is due to a downturn in exports from the major emerging economies which, according to the latest business surveys, is …
24th April 2014
Preliminary business surveys suggest that the recovery of global manufacturing continued in April. Activity in the euro-zone has picked up, but this has not eliminated the threat of deflation. Growth in China has slowed, but not steeply enough to prompt …
23rd April 2014
The rebound in lending to non-financial companies in the US supports our view that the recovery there is gathering momentum. It also contrasts with still-lacklustre credit growth in Japan and with declining private sector lending in the euro-zone. … …
The swing in Japan’s trade balance from large surpluses to large deficits is back in the news after the March data (released yesterday) confirmed a record shortfall in the fiscal year just ended. Fortunately, the outlook for Japan’s external sector is not …
22nd April 2014
The fiscal drag in advanced economies is fading more rapidly than previously anticipated. This should provide some support for the global recovery both this year and next. However, the longer-term outlook for public finances in Japan and parts of the …
16th April 2014
The world economy should expand steadily in the coming two years, helped by an increasingly strong recovery in the US. However, while the euro-zone has stabilised, it is not growing fast enough to resolve its deep-seated problems; and the jury is still …
14th April 2014
There would be very few winners from any further escalation of the crisis in Ukraine, but Russia still has more to lose in economic and financial terms than the West. In particular, Western European economies may not be as vulnerable to a trade war that …
The fiscal drag in advanced economies is fading more rapidly than previously forecast, which should provide some support for the global recovery in the coming year or two. But the longer-term outlook for public debt remains a major concern, particularly …
10th April 2014
Continued high savings rates in emerging economies and weak investment in advanced economies suggest that real interest rates will remain low for many years. In addition, policy-makers have a strong incentive to keep rates down, particularly in Japan and …
9th April 2014
The global economy is healing, but the pace of recovery differs markedly between countries. The US is now rebounding from its weather-induced slowdown and the euro-zone is steadily gaining momentum. On the other hand, activity in China has slowed further …
4th April 2014
A range of business surveys published today and yesterday suggest that global manufacturing output is still growing at a reasonable pace, led by the US. However, the euro-zone’s recovery has continued to be underwhelming, growth in China has slowed and …
1st April 2014
The Fed’s recent changes to its forward guidance mean that market participants are likely to scrutinise interest rate forecasts by Fed officials more closely than they have done in the past. However, the track record of central banks which already publish …
28th March 2014
There are still significant hurdles to clear before the US becomes a major energy exporter. Indeed, the US (in contrast to North America as a whole) may never quite achieve full energy independence. Nonetheless, increased US exports – or at least a …
25th March 2014
The volume of world exports rose by 0.6% m/m in January according to data published today by the CPB Netherlands Bureau for Economic Policy Analysis. This follows a small fall in December and means that world trade growth remained sluggish on a …
24th March 2014
Preliminary PMIs for March suggest that the US economy is rebounding from its weather-induced soft patch and that the euro-zone is continuing its gradual recovery. However, they also provide further evidence that China’s economy has slowed. … Further …
As expected, the Fed announced a further reduction in its monthly asset purchases this month meaning it remains on course to end QE in the final quarter of the year. Nonetheless, it will still be buying assets this year and is in no hurry to return rates …
21st March 2014
The crisis in Ukraine still has the potential to have a significant impact on the European economy and global financial markets. Nonetheless, the most likely outcome appears to be a limited exchange of sanctions and a diplomatic settlement that sees the …
In yesterday’s Budget, the UK government pledged to press on with its austerity plan for at least five more years. But the UK is an exception. In most advanced economies the fiscal drag is easing and this should support the global recovery during the …
20th March 2014
Concerns about potential disruption to Russian energy exports initially caused oil and natural gas prices to rise as the crisis in Ukraine unfolded, and they may yet do so again. But global energy prices could eventually end up lower than otherwise if …
19th March 2014
China’s continuing economic slowdown is clearly bad news for some commodity exporters. However, the world as a whole should actually benefit from slower but better-balanced growth in China. The risk of a “hard landing” is also still small and perhaps even …
13th March 2014
The global recovery appears to be strengthening, but we do not expect a generalised pick-up in inflation. In the US, core inflation may rise to 2% or more over the next two years as the economy gradually returns to full employment. However, inflation will …
11th March 2014
The crisis in Ukraine still has the potential to have a significant and prolonged impact on the global economy and financial markets, even though our current judgement is that the fallout is likely to be limited and short-lived. … What the crisis in …
7th March 2014
A combination of severe winter weather in the US, New Year celebrations in China and a planned tax hike in Japan are making it more difficult than usual to assess the strength of the world economy. Nonetheless, we still think that world GDP growth is …
5th March 2014
If the crisis in Ukraine escalates further, the West seems more likely to impose limited financial sanctions against Russia than to target trade in goods, especially energy. Some Russian officials have flagged up the risk that Russian borrowers might then …
Final manufacturing PMIs for February, published today, reinforce the impression that global growth remains quite strong, notwithstanding the slowdown in China and slow growth in the euro-zone. … Global manufacturing growth steady in …
3rd March 2014
The prospects for inflation are once again becoming the key factor driving monetary policy decisions by the Fed and the Bank of England, as both central banks have been forced to re-think their approach to forward guidance. At the same time, the risk of …
27th February 2014
Extreme weather conditions have made the economic outlook in many countries less clear in recent months. However, experience suggests that the impact on GDP and inflation will probably turn out to be fairly limited. Moreover, any fall in activity is …
25th February 2014
The volume of world exports fell by 0.4% m/m in December according to data published on Friday by the CPB Netherlands Bureau for Economic Policy Analysis. This follows zero growth in November and means that world trade was stagnant at the end of last …
24th February 2014
The G20’s bold plan to boost their collective GDP by more than 2% over the next five years contains many of the elements of the policies, collectively known as “Abenomics”, adopted by PM Abe’s government in Japan. However, the slow pace of progress in …
The monetary base in advanced economies has continued expanding in recent weeks, largely due to the asset purchase programmes of the Fed and the Bank of Japan. Indeed, the aggregate monetary base of the six largest advanced economies has now reached well …
21st February 2014
Preliminary business surveys for February indicate that manufacturing activity slowed further in China and that the recovery in the euro-zone has faltered. But the news from the US is more reassuring. … Manufacturing surveys point to slower growth, US …
20th February 2014
This weekend’s G20 meeting may well see calls for US policy-makers in particular to take more account of the global fallout from their actions, but we expect such demands to continue to fall on deaf ears. That is probably the right response. … Does the …
Policy-makers from some emerging economies may air their grievances about US monetary policy at next week’s G20 gathering, but there is no consensus among them on what the Fed should be doing. More generally, the G20 looks increasingly as if it is just …
14th February 2014
The decisions of the Fed and the Bank of England to place less emphasis on the unemployment rate as a guide to future policy should give them more wriggle room to keep interest rates low. The changes also underline that, when it comes to central bank …
12th February 2014
The drop in global equity prices since the beginning of the year should have little effect on growth. It reverses only part of the increase in prices over the past two years. Moreover, the steepest declines have been in countries in which impact of …
10th February 2014
The world economy continued to grow at a decent pace in January. The global composite PMI, for example, is consistent on past form with world GDP rising by around 4%. Moreover, we doubt that the outlook will have been much affected by the recent sell-off …
6th February 2014
The IMF’s Managing Director, Christine Lagarde, recently suggested that deflation is still a major risk for the world economy. Since her speech, there has been a sharp drop in equity prices, particularly in emerging markets, commodity prices have begun to …
4th February 2014
Despite the slowdown in China and the instability in some other emerging markets, the latest business surveys suggest that global manufacturing output grew at a steady pace in January. … Global manufacturing expansion continued in …
3rd February 2014
The recent sharp falls in the unemployment rate in the US and particularly the UK have raised expectations that their central banks may soon be forced to tighten monetary policy in order to head off a rise in wage inflation. However, we suspect that …
29th January 2014
The recent volatility in emerging markets may have a negative impact on some developing countries, but it should not prevent a gradual acceleration of growth in advanced economies. … EM sell-off to have little impact on global …
28th January 2014
The worst period of global fiscal austerity is finally passing and this should give a boost to growth in advanced economies, at least relative to 2013. But the benefits will vary between countries. The US stands to gain the most, as last year’s draconian …
24th January 2014
