Global update: growth downgraded, but inflation pressure builds on oil and ageing US cycle (page 2)
Following a disappointing first quarter we have cut our 2015 forecast for global growth to 2.5% from 2.8%. Downgrades are focussed on the US, Japan and the UK.
The emerging markets met our rather low expectations, whilst the bright spot was the Eurozone where we have upgraded our growth forecast.
Lower growth has not led us to lower our inflation projections as oil prices have firmed and we see inflationary pressures building in the US where interest rates are expected to rise in September. Elsewhere though monetary policy is set to remain loose, or ease further in the case of China.
Our updated scenario analysis reveals continued concerns about deflation, but an increasing focus on the risks around Fed policy.
European forecasts on track (page 8)
Growth in the Eurozone has largely been as forecast, although within the mix of member states, Spain, France and Italy outperformed expectations, while Germany disappointed slightly.
However, a closer look supports our view that Germany will continue to drive the recovery, while the recovery in France still looks fragile.
The UK’s election uncertainty has passed, which should help the economy recover from the first quarter disappointment.
However, the resumption of austerity will slow growth from 2016. Moreover, lower than expected inflation over this year is now expected to delay the first interest rate hike to 2016.
Emerging markets: Bother in the BRICs (page 14)
Limited growth changes to our emerging markets forecast, but all of the BRIC members face challenges this year, with sentiment on India beginning to turn.
Views at a glance (page 20)
A short summary of our main macro views and where we see the risks to the world economy.
This month's full Viewpoint can be found at the link below.
- Monthly markets review - July 2021
- Emerging Europe: does the rally still have legs?
- Why is digital infrastructure so important for real estate investing?
- What are the risks in high yield real estate debt?
- Can a long short fund be sustainable?
- Eurozone growth overtakes US in surprise turnaround