The forward view – Global: September 2016

Global growth still not lifting off.

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Key points: 

  • Sluggish global growth was the focus of the latest G20 meeting, particularly protectionist trade measures, rising support for “populist” anti-globalisation political parties and the difficulty in persuading voters to support reforms needed to lift productivity and growth.
  • Despite signs of stabilisation in areas of the world where economic activity has been weak, there is little evidence of new growth engines appearing that could pull economic growth out of the doldrums. Consequently, we do not expect much improvement in global growth which should remain below trend.
  • Sub-trend growth and below target inflation means that central banks are under little pressure to lift their policy interest rates off historically low levels. The Fed should continue its ultra-cautious tightening with a rate hike in December but in the UK, Japan and Euro-zone the odds are skewed more to monetary loosening than interest rate increases.
  • While global growth has been disappointingly sluggish, output expansion has continued through numerous shocks – Brexit, 2015’s Chinese currency and share market volatility and the early 2016 growth scare to name just three.

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