Global

While major Advanced Economy growth was little changed in Q3, we expect US growth to ease somewhat further and Japan’s economy is set to contract in Q4, although the yoy growth rate is likely to bottom out by mid-2020. Growth in Emerging Market economies eased slightly in Q3 driven by a slowdown in China and India, although we expect EM growth to pick up from here. Our world GDP growth indicator for Q3 is at 3.0% yoy, basically the same as in Q2, our global leading indicator suggests that growth may have bottomed out and the global manufacturing PMI has started to turn around. These indicators are consistent with our forecasts for global growth (on a yoy basis) to remain around current levels before strengthening from mid-2020. We are expecting global growth of 3.0% in 2019 (revised down from 3.1%), 3.2% in 2020 and 3.5% in 2021. Trade policy remains a risk to the outlook although at the time of writing press reports indicate that a “Phase One” US-China trade deal is imminent.

This month we recorded a podcast to accompany the Forward View – Global, giving you a 10 minute summary of our key forecasts.
To listen, just click the link below.

Australia

Following the release of the Q3 national accounts we have maintained the shape of our forecasts, expecting weakness in the household sector to persist and only modest business investment growth. This is expected to be offset by further near-term growth in exports and continued strong public-sector spending. Overall, we expect growth of around 1¾% this year and continued below-trend growth of 2.0% and 2.4% in 2020 and 2021. These weak growth outcomes will see employment growth slow to around 1% and the unemployment rate rise to around 5.5%. With this level of spare capacity, it is likely that wage growth will also remain modest – continuing to drive low rates of household income growth. We also expect inflationary pressure to remain weak, not reaching the bottom of the RBA’s target band until end 2021 with both domestic and global inflation remaining weak. Hence, rates are likely to remain low for an extended period and will likely need to move lower in the near-term to provide further stimulus. We see a further two 25bp rate cuts in 2020 – the first occurring in February alongside a reassessment by the RBA of its forecasts and the second in June. We also see the risk of a move to unconventional policy should the economy turn out weaker than our current set of forecasts – that is, the unemployment rate rises further above the 5.5% mark.

Our podcast series to accompany the NAB Forward View – Australia continued this month, giving you a 10 minute summary of our key forecasts.
To listen, just click the link below.

Find out more in NAB’s world on two pages December 2019