April 13, 2017

The Forward View – Global: April 2017

Geo-political risks fail to dent global reflation...for now.


  • The global economic upturn has ridden out geo-political shocks in the UK and US. The latest business surveys show very positive sentiment across the big advanced economies, recent data on global industrial output and trade shows the upturn continuing through the early months of 2017 and fear of global deflation has gone as modest price pressure returns.
  • So far, the advanced economy upturn has only had a modest impact on global growth. Emerging market economies are the main drivers of global expansion and their growth has stagnated. Industry has shown the strongest cyclical recovery in the advanced economies but it is less than a fifth of GDP with the much bigger service sector showing a less pronounced upturn.
  • Central banks appear more relaxed about the outlook with the period of maximum policy stimulus probably now behind us as the US Fed focuses on gradually lifting interest rates and the others see little need to take any new measures to boost demand.
  • Politics still presents the main risk to our forecast acceleration in global growth from 2016’s 3% rate to around 3½% by 2018 with the focus shifting to the series of elections due in Western Europe through the next year, especially those in France and Italy where anti-Euro populist parties have been polling strongly.
  • We look at how China’s growth model has delivered high but very unequal income expansion with wealth and income concentrated at the top and in certain regions. This is now changing with inequality coming off in recent years, faster growth in poorer regions and the top 10% share of income falling. A growing lack of social mobility is still a major problem.

For further details, please see the attached document.