December
No publication this month.
To keep up to date with developments please check out our
Global Markets Weekly
and
Daily Themes
publications.
November
No publication this month.
To keep up to date with developments please check out our
Global Markets Weekly
and
Daily Themes
publications.
October
Talk of double dips is not unusual early on in economic recoveries, but is likely to prove unfounded this time, with only a 30% chance growth turns negative.
In every recovery since the double dip of the early 1980s, there has been a flood of stories about a second leg to the recession early on in the rebound. August saw just such a surge as US activity data turned out weaker than the consensus had expected.
Our recession probability models suggest that a double dip is a possibility, but not a certainty.
We believe there is around a 30 per cent chance of a double dip in the US economy, even allowing for the de-leveraging process holding back credit creation. As a result of double-dip fears, consensus expectations for 2011 US GDP growth fell sharply over the summer, from 3.1% to 2.4%, and are now much closer to our own range estimate of 1.8-2.3%.
Read more...
September
A return to recession in the US remains a key risk, but far from a certainty.
Although we expect US growth to slow, a return to recession remains a key risk rather than a certainty.
The probability of a double-dip has risen in recent weeks, but remains well below fifty percent.
Leading indicators suggest a 30% probability of a return to recession over the next six months. This even allows for the danger of a policy error as the economy makes the transition from policy stimulus and growth that is driven by inventory rebuilding to a sustained private sector recovery. Nevertheless, this transition will not be a smooth process, so equity market volatility will have regular spikes.
Read more...
August
Growth will disappoint as
austerity across most of the
global economy starts to bite.
Global growth will slow by more than the consensus expects in 2011 as fiscal
tightening by a large swathe of the developed countries starts to bite.
The austerity measures in these countries, which account for sixty percent of developed economy GDP,
will add to continued consumer de-leveraging, while banks remain reluctant to lend. Emerging
markets will be affected by weaker demand in key export markets, but it is important to
remember that these countries have scope to engage in further policy stimulus if required.
Indeed, we expect China to ease policy later this year and provide a catalyst for
outperformance by Chinese equities.
Read more...
July
Aggressive fiscal tightening intensifies the headwinds impeding global recovery. Read more...
At the start of the year our central scenario for 2010 and 2011 saw three major headwinds impeding global recovery: fiscal tightening, households rebuilding savings and banks shrinking balance sheets. With governments running scared of bond markets, fiscal tightening is now being aggressively pursued in the euro-zone and the UK. This heightens the key risk to our central scenario – that intensifying headwinds overpower the fledgling private-sector recovery, leading to deflation. Central banks will therefore keep ultra-low rates in place for longer than generally anticipated and stand ready to intervene swiftly with a further injection of quantitative easing.
June
Fiscal retrenchment will not be limited strictly to peripheral Europe...
Financial markets are in the process of getting to grips with the implications of the fiscal crisis that has followed in the wake of the 2008/09 banking crisis. The problems are not confined to the periphery of Europe, but are spread fairly widely through advanced economies, with some 60% by economic weight having concerning debt-to-GDP ratios. So it is not just in Europe that major fiscal adjustment is required over the coming years, but also in the US, Japan and the UK.
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May
Business surveys strongly suggest global recovery is gathering pace.
Exceptionally robust monthly business surveys for March have provided compelling evidence that the global recovery is gathering pace. The global purchasing managers’ survey rose to a six-year high, attesting to the highly-synchronised nature of the upswing. Individual country surveys have also recovered sharply for their low points, with marked rises in the CBI survey in the UK, the Ifo survey in Germany and Belgian business confidence. Moreover, monthly trade figures show overall world trade rebounding strongly, with the most recent Asian data, IATA air freight traffic and global PMI export orders all signalling that even better news is in the pipeline.
April
It looks like recovery is becoming more profit-driven and self-sustaining.
The global economy continues to revive and there are some signs that the recovery is becoming more profit-driven and less dependent on stimulus measures. Activity data for the major economies has been comfortably above consensus over the past few weeks. The global PMI is at its highest level since late 2007, while world trade has recovered around 60% of the ground lost during the recession. Nevertheless, the distribution of major forecasters’ growth expectations remains skewed to the downside. In other words, they continue to view the glass as half empty rather than half full. Consequently, risk assets are likely to respond particularly positively to any further good economic news.
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March
Debt burdens - a legacy of the financial crisis - will suppress growth in major developed economies.February
China is overtaking the US as the driver of global growth.
The US economy, traditionally the driver of global growth, appears to have transitioned from recession into recovery, although recent data has been mixed. This contrasts strongly with China, where recent statistics have exceeded market expectations. Indeed, whereas US economic activity remains significantly below pre-crisis levels, many indicators in China have surpassed their previous peaks.
Read more...
January
The new year should usher in better fortunes for the world economy, but headwinds are likely to preclude a return to pre-crisis growth levels.