Economic and Strategy Viewpoint

April 2014

In this month's Viewpoint: The US leads the recovery, but the world's locomotive is fading, UK: Taming the housing market, South Africa: Zuma zooms on, China: The dragon begins its descent, and Views at a glance.


Keith Wade

Keith Wade

Chief Economist & Strategist

Azad Zangana

Azad Zangana

Senior European Economist and Strategist

Craig Botham

Craig Botham

Emerging Markets Economist

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The US leads the recovery, but the world’s locomotive is fading (page 2)
• US economic activity is strengthening after a harsh winter and the economy is leading the global upswing in the developed world. Whilst this is good news for global growth, the US economy - which is emerging from the financial crisis - will make less of a contribution to the rest of the world. Signs of this are already apparent as, despite leading the upswing, the US trade deficit has not deteriorated as in the past.
• This is not a US “stagnation” forecast as although weaker consumer spending is an element, we also see better trade performance from the US. Instead, the greater pressure will be felt in the rest of the world, particularly the emerging markets. Deflationary pressures which have been apparent in recent CPI figures are also likely to persist. 

UK: Taming the housing market (page 8)
• UK house prices are rising strongly again despite very weak growth in earnings. Low interest rates and various forms of monetary and fiscal stimulus schemes have reignited confidence. While rising house prices are indicative of a recovering economy, questions are being asked over its sustainability. We find that a chronic lack of supply is to blame and believe it is time for the government to enter the market to provide additional supply.

South Africa: Zuma zooms on (page 13)
• Elections in South Africa next week are certain to return an ANC majority despite corruption allegations. The race for second place could, however, sway the future direction of policy at a crucial time for an economy struggling with a febrile labour situation and anaemic exports. Reform is needed but far from guaranteed.

China: The dragon begins its descent  (page 16)
• China has begun to slow but we do not believe significant stimulus is likely. Measures so far have been for support rather than acceleration in activity

Views at a glance (page 17)
• A short summary of our main macro views and where we see the risks to the world economy..