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September’s purchasing managers’ surveys support our view that, for now, the world economy is slowing, but not heading for an outright recession. But advanced economies, particularly the eurozone, are already at risk of a double dip, and there are reasons …
6th October 2011
The widespread adoption of new Tobin-style levies on financial transactions remains unlikely, despite the latest endorsement from EC President Barroso today. Nonetheless, there is growing international support for a significant increase in the burden of …
29th September 2011
The latest purchasing managers’ surveys suggest global economic activity remained very sluggish in August. Although the figures do not point to an outright fall in world GDP, they are consistent with exceptionally low growth in advanced economies, and a …
7th September 2011
The slowdown in global growth and recent falls in commodity prices will feed through to lower headline and core inflation in the coming months. Indeed, headline inflation is already at or near its peak in most major economies, while core inflation should …
31st August 2011
The major Western economies are in dire need of some good news soon to prevent a renewed slide into recession. The best hope is probably a further fall in oil prices and a sustained decline in long-term interest rates. But even if these factors do allow …
20th August 2011
Emerging markets should continue to grow rapidly over the next few years but, in contrast to the view of most commentators, we doubt that this will be of much benefit to the developed world. … Can emerging markets rescue the rest of the …
18th August 2011
The recent slump in equity prices is not necessarily a forerunner of a collapse in economic activity. However, the impact of previous episodes of asset price weakness has typically been mitigated by a substantial loosening of monetary and/or fiscal …
17th August 2011
Despite benefiting from generally better fundamentals, no emerging market (EM) is immune from the deepening problems in the US and Europe. Growth everywhere is likely to slow over the next year and, while Asia should continue to outperform, we are …
9th August 2011
The news that S&P finally pulled the trigger by cutting America's long-term credit rating from AAA to AA+ will surely rock the financial markets when they open on Monday. But any spike in Treasury yields and/or fall in the dollar should be relatively …
6th August 2011
The recent sharp falls in financial markets have vindicated our bold expectations for equity markets and bond yields. While we are not minded significantly to redraw our forecasts at this point, there are clear risks of further steep falls which will …
Today’s batch of purchasing managers’ surveys paints a very gloomy picture. Overall, the data are further evidence that the slowdown in global growth is both sharp and broad-based, and suggest not just a temporary soft patch, but a more substantive loss …
2nd August 2011
Global growth has slowed after a strong start to the year. This is partly due to the temporary effects of supply shocks, notably the surge in oil prices and the earthquake in Japan. But even as these shocks fade, the recovery will be held back by tighter …
20th July 2011
History suggests that in many cases a sovereign default ultimately proves to be a good thing for the country concerned, as it can set the stage for economic recovery. This is more likely to be the case if the default is followed by a substantial debt …
8th July 2011
This report is only available as a PDF. Click to download. … More signs that global growth is slowing …
7th July 2011
Fears of a widespread bubble in emerging markets look overdone, but there are growing signs that rapid capital inflows are stoking problems in several countries. We think the biggest risks lie in Turkey and Brazil, where the threat of a sharp downturn in …
2nd July 2011
The recent fall in oil prices should help to stabilise global growth in the coming months. But prices would need to drop significantly more to offset other headwinds that will pick up further in 2012, notably the tightening in fiscal policy. … Have oil …
29th June 2011
We continue to think that the markets are complacent about the potential implications of the crisis in Greece both for the rest of the euro-zone and the global economy as a whole. Greece still has the scope to be the next Lehmans, or at least the next …
22nd June 2011
The disruption to Japanese supply chains following the 11th March earthquake has had a big impact on global vehicle production, a drag which is likely to fade over the coming months. But this only explains a small part of the current slowdown in the world …
17th June 2011
Deliberately embracing higher inflation as a way out of the sovereign debt crisis could have disastrous consequences. Instead, for most advanced countries, wherever it is feasible, a combination of fiscal austerity and sustained economic growth offers the …
14th June 2011
The global manufacturing PMI fell sharply in May and is now at its lowest level since September 2010. This confirms that economic growth has slowed since the beginning of the year, and that industrial production is likely to weaken in the coming months. … …
1st June 2011
Recent developments have reinforced our view that, although headline inflation will continue to rise in the coming months, it is likely to peak before the end of this year in both advanced and emerging economies. The momentum behind global growth has …
16th May 2011
Inflation will continue to edge higher in most emerging markets over the coming months but should peak by Q4. Indeed, in some countries (notably China) it may already have done so. Accordingly, while policymakers in some economies still have more work to …
9th May 2011
China’s struggle with rising prices is reverberating around the world. Domestic inflation is the highest it has been in nearly three years. Wages are increasing at a double-digit annual pace. No wonder that many are asking whether the era of China as a …
5th May 2011
Purchasing managers’ surveys confirm that global manufacturing growth continued steadily in April, although the pace of growth appears to have slowed slightly in developed countries. They also show little evidence that disruption to supply chains is …
4th May 2011
The attached note highlights the differences between our latest forecasts and those of the IMF, both published yesterday, and the most recent consensus forecasts, taken from the Consensus Economics survey dated 4th April. We consider both the IMF and …
12th April 2011
The recent decline in China’s trade surplus is positive for global growth but it will rapidly reverse if commodity prices fall. Concerns that reduced currency intervention by China will push up Treasury yields are misplaced. … What does China's trade …
We expect the pace of global growth to slow during this year, particularly in advanced economies. Restrictive fiscal policy will begin to bite and consumer spending will weaken. Inflation will rise further in the coming months before falling towards the …
11th April 2011
The ECB’s widely anticipated decision to raise rates for the euro-zone today does not make it more likely that monetary policy will be tightened in other major advanced economies any time soon. … No rush to follow the …
7th April 2011
March’s PMI data show that despite the political turmoil elsewhere in the region, the UAE’s non-oil private sector’s recovery is gaining momentum. … UAE HSBC/Markit PMI …
5th April 2011
Since the earthquake struck on 11 th March, there have been many warnings that massive economic disruption in Japan will be transmitted equally around the world through global supply chains . In our view, these concerns are exaggerated. They are based …
25th March 2011
The latest data show that world trade grew strongly in January and that emerging markets continue to outperform advanced economies in this respect. This is consistent with the evidence from purchasing managers surveys that the global economy continued to …
24th March 2011
The economic costs of natural disasters, although nowhere near as important as the loss of life, are typically much less than those of major financial shocks. A discussion of why this is the case might shed more light on the implications of the earthquake …
23rd March 2011
Once the immediate uncertainty clears, Japan’s nuclear crisis is likely to have only a limited impact on global energy markets. The events in Fukushima will raise concerns about costs and security, but nuclear power will still play a role in meeting …
22nd March 2011
The latest leading indicators reveal plenty of momentum behind the recovery on both sides of the Atlantic. However, we still expect global growth to slow in the second half of the year and into 2012 as policy stimulus fades, albeit at different paces in …
10th March 2011
Inflation will climb further in most major economies over the coming months, reflecting both higher energy prices and higher food prices. The peaks should still be lower than those in 2008 as long as the price of oil does not continue to rise. Headline …
7th March 2011
The current spike in oil prices has inevitably led to comparisons with other episodes when prices have surged over a relatively short period. The last five such episodes were all followed by global recessions. The more we look at these comparisons, the …
2nd March 2011
The turmoil in the Middle East has prompted a chorus of warnings that the world economy could be dragged back into recession if the price of oil continues to climb. We were already expecting global growth to be slower this year than in 2010, and slower …
23rd February 2011
One obvious beneficiary of the continuing turmoil in the Middle East and North Africa is the price of gold, which has again popped above $1,400 per oz. Indeed, there are plenty of parallels with the highs seen in January 1980 in the wake of the second …
This weekend’s meeting of G20 finance ministers and central bank governors appears to have achieved as little as expected. The most substantive decision was to agree a list of indicators which will be used to assess global imbalances in future. We expect …
21st February 2011
When G20 Finance Ministers hold their first meeting of the year this weekend, one of the issues on the agenda will be reform of the International Monetary System, including a proposal to promote the role of Special Drawing Rights (SDRs) as an alternative …
17th February 2011
Much of the coverage of the wider fall-out from the crisis in Egypt has focused on the potential impact on oil prices, but this threat to the global recovery is almost certainly exaggerated. Instead, the bigger risk may be the lingering impact on …
21st January 2011
We expect 2011 to be a year of generally disappointing growth and fading fears of inflation in the developed economies. The performance of emerging markets is likely to be more mixed this year than last, but in general the outlook for these economies …
The Fed's QE2 programme of Treasury purchases is yet to have any impact on the broader monetary aggregates, let alone price inflation. The annual growth rate of our Capital Economics' measure of M3 remains in negative territory, while the growth rate of …
17th January 2011
The upward pressure on inflation this year from the recent surge in the cost of agricultural commodities will be much greater than that from the pick-up in oil prices. Fortunately from this perspective, neither is likely to be sustained. The second round …
5th January 2011
The recent surge in the prices of agricultural commodities will put upward pressure on inflation well into 2011. But inflation in most major economies still looks set to peak some way below the levels seen in 2008, with reasons just as good now as then to …
23rd December 2010
We expect growth in emerging economies to stay strong in 2011 and, generally speaking, the major challenge facing policymakers will be to ensure that inflation remains contained and that capital inflows do not threaten financial stability. This will bring …
22nd December 2010
The additional fiscal stimulus in the US and the ongoing credit boom in China have improved the near-term prospects for the global economy, but they do nothing to resolve the underlying imbalances that threaten the sustainability of the recovery. World …
We do not believe there is a bubble in government bonds. Bubbles are more likely to develop in emerging markets but are not yet widespread. Instead, our greatest concern is the high levels of commodity prices, particularly industrial metals and …
9th December 2010
One of the biggest risks facing the world economy is a lurch towards protectionism, culminating in a trade war between the US and China that would threaten to spill over to other countries. We expect pressure to build over the next couple of years. But if …
6th December 2010
A run of improving data from the US, Europe and Emerging Asia (especially China) has raised hopes that global growth is accelerating again after a temporary slowdown over the summer. Earlier fears of an imminent double-dip have certainly dissipated. …
2nd December 2010
