Global & Australian Forecasts – October 2014

Disappointing global growth continued into mid-2014 with GDP expanding by a sub-trend 3% yoy and concern over weakness in Japan and the Euro-zone offsetting solid growth in the US and UK. Chinese forecasts unchanged.

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Key Points:

  • Disappointing global growth continued into mid-2014 with GDP expanding by a sub-trend 3% yoy and concern over weakness in Japan and the Euro-zone offsetting solid growth in the US and UK. Chinese forecasts unchanged. We expect global growth to improve to around 3½% yoy through 2015 and 2016, mainly reflecting faster growth in the US and India as well as a return to more normal growth in Latin America. Inflationary pressures should remain subdued, allowing central banks in the US and UK to lift rates very gradually through the next few years while rates should stay low in Japan and the Euro-zone.
  • Weaker Q3 and terms of trade means GDP forecasts revised down modestly: 2014/15 2.8% (was 2.9%) and 2015/16 3.2% (was 3.4%). Unemployment rate still to peak at around 6½%. We continue to expect no change in cash rate until a tightening cycle begins near the end of 2015.

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