Economic and Strategy Viewpoint - September 2017

–       Steady global growth and low inflation means we remain in a goldilocks environment where activity is neither too hot nor too cold. However, beneath the headline growth figure, the Eurozone and to some extent the emerging markets are picking up the baton from a cooling US.

–       There are signs that the US consumer is running out of steam for lack of real wage growth, although stronger capex should offset this over the remainder of 2017. Inflation continues to surprise on the downside and although we look for a return to target, this is unlikely to occur until later in 2018, indicating an extended period on hold for the federal funds rate.

–       Another strong quarter for eurozone growth; however, as business surveys moderate, so have the risks to our forecast. We have upgraded the growth forecast for 2017 and 2018, and slightly downgraded inflation.

–       Meanwhile, the UK forecast is on track. No change to the growth forecast but inflation has been re-profiled slightly. As the impact from the sterling depreciation starts to fade, households are more likely to replenish savings before returning to previous spending habits.

–       We mostly revise the BRIC economies higher as data surprises and idiosyncratic risks fade. India is an exception thanks to self inflicted wounds. Meanwhile, the disinflationary trend continues, with inflation projections revised lower across the board.

–       A short summary of our main macro views and where we see the risks to the world economy.