Softer conditions to start the year
Insight
Weak retail trade and net exports point to soft GDP growth in Q2. Headwinds remain, but business conditions jumped to four year high, while, business confidence, orders and capacity utilisation all looking better. We have trimmed our global forecasts.
We have trimmed our global forecasts to take account of the impact of default in Argentina on Latin American growth and unexpectedly soft Japanese exports and post-tax consumption which led us to significantly lower our Japanese forecast. Elsewhere, solid growth numbers are coming from the UK and US but the Euro-zone presents downside risks (with soft recent business surveys and Q2 GDP in Italy and Belgium) to growth and a clear threat of deflation. The emerging economies now drive around 70% of global output growth but present a mixed picture. China’s growth remains robust, India’s has disappointed but could be about to pick up and East Asian economies are likely to remain subdued pending faster world trade. Overall, world growth in 2015 to rise to 3.6% (nearer trend) from a mixed and disappointing 3.1% in 2014.
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