Economic and Strategy Viewpoint - June 2018

In our latest forecast update, we have revised down our expectations for global growth for the first time since September 2016.

25/05/2018
oil-platform
Read full reportEconomic and Strategy Viewpoint - June 2018
25 pages669 KB

Authors

Keith Wade
Chief Economist & Strategist
Azad Zangana
Senior European Economist and Strategist
Craig Botham
Senior Emerging Markets Economist

Forecast update: growth peaking, inflation rising

  • Global growth remains robust, but we have revised down our forecast for 2018 to 3.4% from 3.5%. This largely reflects a soft start to the year in many economies, higher oil prices and increased concerns over trade relations between the US and China. This represents the first downgrade to growth since September 2016.
  • Monetary policy is expected to tighten across the developed world over the forecast period with the Federal Reserve hiking to 3% by mid next year, the European Central Bank ending quantitative easing purchases in Q4 this year and raising rates in 2019. Some adjustment of Bank of Japan policy can also be expected.
  • The world economy is still in the expansion mode, but the forecast indicates that a more stagflationary period may lie ahead and the risks around the forecast are in this direction.

European forecast update: a frosty start to 2018

  • The eurozone economy has experienced a largely unexpected slowdown, calling into question the durability of the recovery. While poor weather may have been to blame, leading indicators have failed to recover. Meanwhile, political risk in Italy has returned as the two biggest populist parties join forces to form a government. 
  • The UK appears to have suffered a similarly poor start to 2018. The good news is that a Brexit transition deal appears to have been agreed. The bad news is that uncertainty appears to be having a larger impact on confidence and house prices than previously feared.

EM forecast update: turbulence interrupts a smooth flight

  • Broadly lower growth and higher inflation compared to our previous forecast for emerging markets (EM). The culprits are, in the main, a weaker than expected first quarter and much higher oil prices, though sanctions and trade tensions also weigh on activity.
  • Higher inflation should close the door on further rate cuts for most of EM, though we think Russia still has space for one more. Otherwise, the next moves in Brazil and India seem likely to be hikes

The full PDF is available below.

Read full reportEconomic and Strategy Viewpoint - June 2018
25 pages669 KB

Authors

Keith Wade
Chief Economist & Strategist
Azad Zangana
Senior European Economist and Strategist
Craig Botham
Senior Emerging Markets Economist

Topics

Global
Azad Zangana
Craig Botham
Keith Wade
Inflation
Interest Rates
China
Economic views
Economic & Strategy Viewpoint
Commodities
Follow us

Please remember that the value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.

This marketing material is for professional clients or advisers only. This site is not suitable for retail clients.

Issued by Schroder Unit Trusts Limited, 1 London Wall Place, London EC2Y 5AU. Registered Number 4191730 England.

Schroder Unit Trusts Limited is an authorised corporate director, authorised unit trust manager and an ISA plan manager, and is authorised and regulated by the Financial Conduct Authority.

On 17 September 2018 our remaining dual priced funds converted to single pricing and a list of the funds affected can be found in our Changes to Funds. To view historic dual prices from the launch date to 14 September 2018 click on Historic prices.