Please see below selected recent economics-related intelligence. This is a synthesis of major recent developments at corporates, business schools, thinktanks, media, commentators, and other key influencers.
Q3 (July-August-September) 2016
- PwC's Economics team launched its monthly Global Economy Watch for June. This month, PwC economists indicate that productivity growth in Ireland and Spain – the top performing peripheraleconomies in the Eurozone – has outstripped that in Germany, France and the Netherlands. But sectoral fortunes have been mixed, with PwC analysis showing that in several Eurozone economies, productivity in the manufacturing sector has grown at a relatively rapid rate. Meanwhile, figures reveal that the eurozone economy grew faster than the US in the first quarter of 2016. But PwC analysis shows that the economic - and to a greater extent, the labour market - recovery has been uneven. For example, the range of unemployment rates in the eurozone at this stage of the recovery is the highest it has ever been compared to past recoveries.
- The World Bank then concurred: global growth will fall to just 2.4% this year, as the world economy is dragged down by weak advancing economies, persistently low commodity prices and subdued global trade, according to its latest health check on the global economy. The bank delivered a substantial downgrade to global GDP, from an earlier forecast of 2.9% made in January, and warned of the threat of rising private debt levels in the emerging world.
- The United Nations cut its global growth forecast for 2016 to 2.4% from its forecast 2.9% in December; however it is attributed largely to the downward revisions for Africa. Global growth is projected to rise marginally to 2.8% in 2017, remaining below pre-crisis trends. The protracted period of slow productivity growth and weak investment weigh on the longer-term potential of the global economy.
- In its latest twice yearly global assessment, the OECD warned that the world economy is “stuck in a low-growth trap”. The organisation said monetary policy alone could no longer be relied on to deliver growth and governments should be using the fiscal tools at their disposal, such as increases in investment spending, to stimulate demand. It also pointed to several downside risks to global growth, the most immediate of which would be if Britain votes to leave the European Union in a referendum on June 23rd.
- Oxford Economics - World Long Term Economic Prospects
- Oxford Economics - World Economic Prospects (May 2016)
- World Economic League Table 2016 - CEBR
- The internet has been a big part of everyday life in advanced economies for more than 20 years, so it is sobering to realise more than half the global population still does not have access to it. That represents close to 4 million people, most of whom are in the poorest regions of the world, who are cut off from all the information, entertainment and economic opportunities that we take for granted. Internet access may not be as essential as shelter, food and clean water, but it could be an important facilitating factor in allowing the next stage of economic development beyond these essentials. So what might be gained if we could achieve universal internet access? A new study by Strategy& puts some numbers on this.
- PwC's own Economics team meanwhile launched its monthly Global Economy Watch, for May 2016. Our economists suggested that as countries struggle to reach their economic potential, infrastructure could be the key to boost growth. They point out that eight years after the financial crisis, many large economies continue to have sizeable negative output gaps - indicating the presence of spare capacity in their economies.
- Corporate borrowers across the world have defaulted on $50bn of debt so far this year as the number of delinquent companies accelerates at its fastest pace since the US emerged from the financial crisis in 2009. The sharp decline in commodity prices, spurred by slowing global growth and lacklustre demand for base metals and crude, has weighed on oil and gas producers and miners. Nearly half of the defaults have occurred in these two industries, with companies such as Peabody Energy, Energy XXI and Midstates Petroleum all missing interest payments.
- The World Trade Organisation revised its 2016 global trade forecast downward by more than one percentage point, warning that a slowdown in China and broad market volatility continue to threaten growth. In September, the WTO estimated that global trade would rise by 3.9% this year, but it now sees a figure of 2.8%, the same rate as 2015 and the fifth year in a row it has been below 3%
- Global economic growth was running at its weakest for over three years in the first quarter, according to Purchasing Managers’ Index (PMI) data. The JPMorgan Global PMI rose to 51.3 in March, but the latest reading represented only a minor improvement on February’s 40-month low of 50.8. At 51.6, down from 53.1 in the fourth quarter, the average PMI reading for the first three months of the year was the weakest calendar quarter since the end of 2012.
- PwC's own Economics team launched its monthly Global Economy Watch for April. Our economists argued that subdued growth in some emerging markets and low commodity prices have led to renewed interest in the link between governments and the financial sector. This has also been an important issue on the global policy agenda as policymakers have tried to loosen these ties.
- Oxford Economics' growth forecast for 2016 was steady in March at 2.3% but the forecast for 2017 has been cut again, to 2.7% from 2.9%. The near-term growth outlook has been supported by a decent rally in financial markets. Since mid-February, world stocks have gained around 8% and a number of key commodity prices - including oil - have also risen. Another supportive trend is still healthy consumer demand in advanced economies including the US and eurozone. Although there has been some slippage in consumer confidence, it has been modest compared with either 2012-13 or 2008-09. So overall, the global economy still looks likely to avoid recession and strengthen a touch next year, but for OE risks to the outlook remain skewed to the downside.
- Investors are especially pessimistic about emerging markets, as the once-mighty BRICs — Brazil, Russia, India, and China — seem to have hit the economic development wall, warned Strategy&. Brazil and Russia are already in deep crisis, India is struggling to implement much-needed structural reforms, and China’s economic slowdown is rippling across the world’s commodity and financial markets. Worse, emerging markets’ challenges may be long-lasting. Many of these markets remain far too dependent on commodities, such as oil, which are unlikely to recover any time soon.
- The world faces a growing “risk of economic derailment” and needs immediate action to boost demand, the International Monetary Fund warned on as new figures pointed to the worst monthly collapse in Chinese exports since 2009.
- PwC's own Economics team meanwhile launched the monthly Global Economy Watch for March. This month, our economists suggest that once again the global economy faces a dangerous cocktail of risks including slowing growth in China, a strong dollar, and low commodity prices. But this time, the emerging market economies look the most vulnerable, while advanced economies are still struggling to escape the low economic growth environment almost a decade on from the global financial crisis.
- The International Monetary Fund (IMF) said the global economy has weakened further and warned it was "highly vulnerable to adverse shocks". It said the weakening had come "amid increasing financial turbulence and falling asset prices".
- The OECD published its Interim Economic Outlook, 'Elusive global growth outlook requires urgent policy response'. Highlights:
- The OECD projects that the global economy will grow by 3 percent this year and 3.3 percent in 2017, which is well below long-run averages of around 3¾ percent. This is also lower than would be expected during a recovery phase for advanced economies, and given the pace of growth that could be achieved by emerging economies in convergence mode.
- The US will grow by 2 percent this year and by 2.2 percent in 2017, while the UK is projected to grow at 2.1 percent in 2016 and 2 percent in 2017. Canadian growth is projected at 1.4 percent this year and 2.2 percent in 2017, while Japan is projected to grow by 0.8 percent in 2016 and 0.6 percent in 2017.
- The euro area is projected to grow at a 1.4 percent rate in 2016 and a 1.7 percent pace in 2017. Germany is forecast to grow by 1.3 percent in 2016 and 1.7 percent in 2017, France by 1.2 percent in 2016 and 1.5 percent in 2017, while Italy will see a 1 percent rate in 2016 and 1.4 percent rate in 2017.
- With China expected to continue rebalancing its economy from manufacturing to services, growth is forecast at 6.5 percent in 2016 and 6.2 percent in 2017. India will continue to grow robustly, by 7.4 percent in 2016 and 7.3 percent in 2017. By contrast, Brazil’s economy is experiencing a deep recession and is expected to shrink by 4 percent this year and only to begin to emerge from the downturn next year.
- The Interim Economic Outlook calls for a stronger policy response, changing the policy mix to confront the current weak growth more effectively. It points out that sole reliance on monetary policy has proven insufficient to boost demand and produce satisfactory growth, while fiscal policy is contractionary in several major economies and structural reform momentum has slowed.’
- The Ifo Index for the world economy dropped from 89.6 points to 87.8 points this quarter, drifting further from its long-term average (96.1 points). While assessments of the current economic situation brightened marginally, expectations were less positive than last quarter. The sharp decline in oil prices seems to be having little overall positive economic impact.
- The current global economy is unpredictable and "disturbed" as a result of transformation. The New Yorker has argued that we may be entering a "post-post-Davos" model. Meanwhile, former Chief Economist at UBS, George Magnus recently highlighted the "varying degrees of turmoil" in an editorial for Prospect.
- EY looked at the disruptive potential of the sharing economy in 'Get ready: open to sharing means open for business'. EY said, that sharing economy business models may change the very nature and structure of the corporation. The potential for the sharing economy to disrupt most industries, globally, is unprecedented. Sharing economy business models have been born into a world wholly unprepared for them. Many existing rules don’t apply. But, ready or not, when a sharing economy opportunity knocks on your door, you’ll need to know how you should answer.
- In The Great Malaise Continues , Project Syndicate noted that optimists say that the global economy will perform better in 2016 than it did in 2015, but warned that may turn out to be true, but only imperceptibly so, unless the problem of insufficient global aggregate demand is finally addressed.
- Oil slid below $33 a barrel in early January to levels not seen in more than a decade, as a tumble in Chinese equities rattled investors already concerned by near-record production and massive stockpiles of unwanted crude. The price of oil has shed around 70% since the current downturn began in June 2014, causing pain to oil companies and governments that rely heavily on crude revenues.
- PwC's own Economics team launched its monthly Global Economy Watch (GEW) for January 2016. This being the start of the year, our economists focused on predictions for 2016.
- Based on historic patterns of the business cycle, the current expansion has lasted longer than the average gap between recessions. It's prudent to start thinking about where the next recession might come from and emerging market corporate debt is a likely contender, warned the EIU. Ultra-low interest rates in the US, EU, UK and Japan have made financing conditions pretty easy for a lot of emerging market corporates in recent years, and many have taken the chance to borrow on international markets to get access to this cheap finance. In 2010-12, strong local currencies in many commodity exporters, like Brazil and Indonesia, meant that much of this borrowing was in US dollars. Companies in Latin America (especially Brazil), Turkey and South Korea are looking particularly exposed. As interest rates are now on the way up in most countries, and the US dollar is going up against most other currencies, the cost of servicing these loans is rising, and there could be some trouble in 2016. There is less to worry about in China, where little debt is denominated in foreign currency, and much lending is to and from entities that are ultimately state-backed.
- The European Commission published its new Circular Economy Package intended to stimulate Europe's transition towards a circular economy to boost global competitiveness, foster sustainable economic growth and generate new jobs. The package consists of an EU Action Plan, a timetable setting out when the actions will be completed and a number of legislative (revised) proposals on waste, setting recycling targets. Press release. The legislative proposals were cautiously welcomed by MEPs, but they argued that on waste recycling, reducing food waste and landfill, the proposals aim too low (in comparison with the targets set in the previous proposal). Reactions from the political groups range from disappointment (liberals) to “much ado about nothing” (Christian Democrats). According to a Brussels journalist, it seems unlikely that this new package will come into law any time soon given that MEPs have vowed to push for higher targets, and member states are expected to struggle to reach the Commission's proposed targets. Some reading: 'PwC Lessons Learned – Going Circular: Towards 100% reuse and recycling'.
- The latest edition of PwC's Global Economy Watch looked at whether consumers are going to behave more like Santa and less like Scrooge over the coming few months. Retail turnover suggests good news for retailers – spending on clothes, communications equipment and leisure activities is now growing faster than average spending, and the outlook is positive for 2016.
- Conditions may be ripe for a December interest rate hike in the U.S., but the global economy is still uncertain, fragile and fragmented, EY's global chairman and CEO Mark Weinberger told CNBC. "The U.S. economy is stable (but) it has significant headwinds. You're looking at tremendous uncertainty," he said, pointing to the looming U.S. presidential election, the question of when the Federal Reserve will raise interest rates and what effect that will have on the dollar. But still, he thinks conditions appear ripe for a hike. "Look at the overall economy: Low interest rates, low inflation, energy prices low, job growth stable, wages starting to rise," he said. "There is a sense of normalcy there, but not strong growth."
- Global growth bounced back strongly in 2010/11 after the financial crisis, but since 2012 it has averaged around 3-3.5%, just slightly below the longer-term average since 1980. PwC's own analysis suggest that we should probably become accustomed to this as the 'new normal' for global growth. Growth forecasts for this year and next are broadly in line with this post-crisis norm.
- The sharp downturns in trade and in emerging markets were factors behind the OECD’s downward revision to its estimate of global growth. The organisation now expects the world economy to expand by 2.9% this year, well below the long-run average. Growth should bounce back, but this “requires a smooth rebalancing of activity in China and more robust investment in advanced economies”.
- New research from Grant Thornton’s International Business Report (IBR), a quarterly survey of 2,500+ business leaders in 36 economies, reveals the extent to which contagion caused by China’s economic slowdown is spreading to businesses around the world. Business confidence and expectations for revenue and exports are down, not just in China’s near neighbours, but in several major economies which count on the world’s second biggest economy as a major trading partner.
- The IMF chief warned of “disappointing and uneven” global growth, with emerging economies set to be buffeted by a fifth consecutive year of slowing expansion. Christine Lagarde set a sombre tone for the gathering, warning that worldwide expansion will fall short of last year’s figures and there will be only a modest growth in 2016.
- Steeper than expected slowdown in China is rippling through the global economy and dragging on its recovery, the World Trade Organisation warned as it lowered its forecast for global trade this year. WTO economists forecast growth of 2.8%, from 3.3% previously, and warned that their prediction remained vulnerable to a cloudy outlook for the world economy. They also warned that even that pessimistic view may be subject to more downgrades.
- After five years of negotiations a deal was struck on the Trans-Pacific Partnership, the biggest trade accord in years. TPP covers 12 countries in Asia and the Americas that account for 40% of the world’s economy.
- See also World’s Top Finance Officials Find Global Economy Sputtering (WSJ).
- PwC's own Economics team launched its monthly Global Economy Watch for October. This month, our economists focused on China’s slowing economy as policymakers manage the rapid cooling of its debt-fuelled property market, and analyse how this poses a major challenge for some economies.
- Deflation returned to the countries that use the euro in September as prices fell at an annual rate of 0.1%. It is the first time inflation had turned negative for six months, with an 8.9% fall in the price of energy largely responsible for the decline. Core inflation in the eurozone, which strips out energy and food prices, showed a 0.9% rise, the same as August. The Eurostat statistics agency also said the eurozone's unemployment rate for August was unchanged at 11%.
- The OECD shaved its growth forecasts for the world economy, which it now expects to expand by 3% this year and 3.6% next. The organisation is anxious that “stagnating world trade and deteriorating conditions in financial markets are curbing growth prospects in many of the major emerging economies,” particularly China and Brazil.
- Oxford Economics' world GDP forecasts were broadly unchanged this month; they expect growth of 2.6% this year and 2.8% next (though the latter has slipped from 3% in June). The last month has seen mixed news, with some positive signals from the US but a new threat to growth from a significant correction in global equities. They also revised up the eurozone this month, with growth now seen at 1.6% in 2015 versus 1.4% before. These positive developments are under threat, however, from renewed financial strains. Global equity prices abruptly slumped by over 10% in the second half of August and have recovered only modestly since.
- Moody's Investors Service cut its 2016 growth forecast in Group of 20 economies to 2.8%, down 0.3 percentage point from the company's call less than two weeks ago. China is projected to grow 6.3% in 2016, down from 6.5% previously. Citigroup also cut its projection for world growth in 2016 to 3.1% from 3.3%. However, finance ministers from the G20 nations insisted the global economy has nothing to fear from a China slowdown as they tried to dispel the pall of gloom that has been cast by sagging growth and market turmoil. G20 representatives, accounting for 85 per cent of the world’s output, expressed confidence in the economic forecast in spite of mounting evidence that global growth is falling short of expectations.
- Europe is finally set to expand despite global setbacks -- although it will be limited at 1.6% for the 2015 year, according to Oxford Economics European Outlook.
- PwC launched its monthly Global Economy Watch for September. This month, our economists focus on sovereign investment funds, and conclude that now is the time for policymakers to review their sovereign investment funds and question whether different objectives could be beneficial for their economy.
- World trade recorded its biggest contraction since the financial crisis in the first half of this year, according to figures that the Financial Times claimed will fuel a debate over whether globalisation has peaked. The volume of global trade fell 0.5% in the three months to June compared with the first quarter, the Netherlands Bureau for Economic Policy Analysis, keepers of the World Trade Monitor, said.
- The eurozone’s economy grew by 0.3% from April to June by comparison with the previous three months, slightly less than the 0.4% that it registered in the first quarter. The surprisingly feeble showing comes despite the European Central Bank launching a big bond-buying programme in March and a depreciated euro, which should boost exports. Germany’s GDP expanded by just 0.4% in the quarter and France recorded zero growth. Still, Greece grew by 0.8% and Spain by 1%. The currency bloc remains on course for its best annual economic performance since 2011.
- PwC's Economics team launched its monthly economy watch, for August. With recent events in Greece bringing bailouts back into the headlines, this month's issue focuses on how the five eurozone bailout economies have been performing. Click here to read the full Global Economy Watch.
- Worries about the Chinese economy and other emerging markets continued to take their toll on commodity prices, pushing the price of copper to under $5,000 a tonne on the London Metal Exchange for the first time in six years. Brent crude fell to under $47 a barrel.
- Global economic growth will slow this year to the lowest rate since the financial crisis, according to the UK National Institute of Economic and Social Research. The think tank cut its 2015 forecast to 3.0% from the 3.2% it predicted in May. It has cut growth forecasts for the US and many emerging market economies, although its forecast for the eurozone has only been cut slightly.
- 2015 has seen extreme weakness spreading across the whole commodities’ complex, almost without exception, with double-digit price declines seen in a range of markets from platinum to copper and thermal coal. Partly this has been driven by US$ strength and, with the euro 10% weaker so far this year, the headwinds to prices have been significant. Fears about weakening Chinese demand are also building, adding downward pressure on prices. The world continues to be awash with oil, as US shale oil production proves resilient to lower oil prices and OPEC continues to ramp up production. The result is a growing imbalance between supply and demand and a continuing build-up in inventories which is stretching the limits of physical storage capacity. In many ways, the remarkable thing is that prices have not fallen further in the face of continued oversupply.
- Gold prices dropped to a five-year low of around $1,090 per troy ounce, partly in reaction to the US Fed repeating that it is on course to raise interest rates this year. The news that China’s central bank, which wants to boost the yuan as a trading currency, had made much smaller purchases of gold reserves than had been thought was also a factor.
- According to the Eurozone Chartbook for July 2015 from Oxford Economics, momentum in the eurozone remains positive. Growth in Q1 was strong compared to the average of the past five years, at 0.4% over the quarter. The latest activity data suggest that the eurozone recovery has, if anything, gained further momentum in Q2. Oxford's GDP indicator points to quarterly GDP growth of about 0.5% in the second quarter. However, the pace of recovery is likely to remain very different across member states and even stronger exports and investment will not be in a position to significantly boost growth until next year.
- The IMF released updated forecasts for the world economy downgrading the outlook for 2015 to annual growth forecast of 3.3%, lower than the 3.5% forecast made in April, and around the same pace of growth recorded in 2014. Growth is still forecast to strengthen in 2016 by 3.8%, the same as the IMF’s April forecasts. Most of the downgrade in 2015 outlook owed to a slower start to the year in the United States.
- PwC's own Economics team launched the monthly Global Economy Watch for July. This month's issue focused on the likely move by the US Fed to hike up its policy rate later this year, and the potential impact of this both within the US and globally.
- In A window of opportunity for Europe, McKinsey argued that Europe’s economic growth since the start of the financial crisis has been sluggish, and the region faces difficult long-term demographic and debt level challenges, but the convergence of low oil prices, a favourable exchange rate, and quantitative easing has given these economies a chance to unlock new economic dynamism by undertaking ambitious reforms and stimulating job creation and investment. The report identified 11 growth drivers in three areas - investing for the future, boosting productivity, and mobilising the workforce- that can help Europe achieve its aspirations. By scaling and speeding reform, mostly at the national level, and stimulating investment and job creation throughout the region, Europe could close its output gap, return to sustained growth of 2 to 3% a year over the next 10 years, unleash investments of €250 billion to €550 billion annually, and create more than 20 million new jobs.
- PwC's Economics team launched its monthly Global Economy Watch for June. This month's issue focused on North Africa. It’s been almost five years since the beginning of the ‘Arab Spring’ which brought about significant change in North Africa and the wider region. With this milestone approaching, PwC economists have taken a look at the five largest North African economies – Egypt, Algeria, Morocco, Sudan and Tunisia – and highlighted some of the key points that businesses and policymakers should consider when thinking about North Africa Click here to read the full Global Economy Watch.
- Global growth again has been sluggish at the start of 2015, warned Oxford Economics, and is expected to total 3.2% (at PPP exchange rates), slightly lower than in 2014. This disappointing performance mostly reflects developments in the US and emerging markets. In the US, a weak H1 will constrain GDP growth this year to around 2%. However, H1's slow growth largely reflects transitory factors and we expect US growth to rebound in 2016.
- The Organisation for Economic Co-operation and Development slashed its forecasts for global growth, as it warned that weak investment and disappointing productivity risk keeping the world economy stuck in a “low-level” equilibrium. The OECD expects the global economy to expand this year by 3.1%, a sharp downgrade from last November’s forecast of 3.7%. The revision follows a weak first quarter for the global economy, the softest since the crisis, led by a sharp decline in the US. The OECD is confident that the slowdown is likely to be temporary, as it predicts global growth to pick up to 3.8% in 2016, broadly in line with its forecast seven months ago, However, it also warns that hopes of a swift recovery could be crushed again, as they have been in the past.
- According to Deloitte's Global Economic Outlook Q2 2015, the economic situation is very different in each of the world’s leading markets: Europe is torn between two poles; the government is acting to thwart China’s slowdown; Japan is recovering; India is strengthening; and Brazil and Russia continue to face serious challenges.
- Euro area annual inflation was 0.0% in April 2015, up from -0.1% in March. In April 2014 the rate was 0.7%. EU annual inflation was also 0.0% in April 2015, up from -0.1% in March. A year earlier the rate was 0.8% - details.
- PwC's Economics team launched the monthly Global Economy Watch for May. This month's issue focuses on the impact on emerging economies of the rising cost of US$ credit. As the US economy has picked up and QE has come to an end, the dollar has appreciated by around 20% on a trade-weighted basis over the past 12 months PwC’s economists have assessed the vulnerability of 14 emerging markets which have issued significant amounts of dollar denominated debt. Most seem reasonably well placed to deal with the risks associated with a stronger dollar.
- The European recovery is gaining momentum, according to Grant Thornton's International Business Report. However, drawing on interviews with more than 1,100 regional executives, The Future of Europe 2015 uncovered a number of threats, from Greek debt negotiations to high unemployment, which continue to undermine European stability and long-term business growth prospects.
- Within the Eurozone bloc, meanwhile, the economy grew at its fastest in almost two years as cheap food and fuel boosted spending and a central bank stimulus programme kicked in. GDP in the 19 countries sharing the euro rose 0.4% quarter-on-quarter for a 1.0% year-on-year rise - just below forecasts in a Reuters poll of economists. Economists said growth was likely to have also been helped by a weak euro and the asset-buying programme the European Central Bank started in early March.
- According to the EU's own forecasts, the combined strength of a number of positive factors blowing in the EU’s direction underpin a slight upward revision for GDP growth this year. Real GDP growth in the euro area is now expected to pick up from 0.9 % last year to 1.5% in 2015 and 1.9% in 2016. In the EU, GDP growth is now forecast to rise from 1.4% in 2014 to 1.8% this year and 2.1% in 2016.
- PwC's own Economics team launched the monthly Global Economy Watch for May. This month's issue focuses on the impact on emerging economies of the rising cost of US$ credit. As the US economy has picked up and QE has come to an end, the dollar has appreciated by around 20% on a trade-weighted basis over the past 12 months PwC’s economists have assessed the vulnerability of 14 emerging markets which have issued significant amounts of dollar denominated debt. Most seem reasonably well placed to deal with the risks associated with a stronger dollar.
- Eurozone loans to the private sector rose for the first time in three years. Excluding loans to banks, lending rose 0.1% in March compared to a year earlier – the first annual increase since March 2012. Proponents of the ECB's QE program credit the addition of billions of euros into the banking system for the increased willingness of Europe's banks to lend.
- New PwC research claimed that the value of online media to consumers in the UK alone is understated by £17 billion. Statisticians generally measure the size of the economy by GDP, which is an estimate of the total value of goods and services produced at market prices. But, as economists have increasingly recognised, there are limitatons to GDP. One important aspect of this is that consumers can now access a great deal of content online for a basic charge that may significantly understate the value they put on online content.
- The IMF's latest (April 2015) report found that global growth remains moderate, with uneven prospects across the main countries and regions. It is projected to be 3.5 percent in 2015, in line with forecasts in the January 2015 World Economic Outlook Update. Relative to last year, the outlook for advanced economies is improving, while growth in emerging market and developing economies is projected to be lower, primarily reflecting weaker prospects for some large emerging market economies and oil-exporting countries.
- The PwC Economics team launched its latest monthly Global Economy Watch, for April. This month's edition focused on the level of employment in the G7 and E7 seven years on from the global financial crisis; looked at how individual countries are succeeding - or not - in boosting the number of those in jobs; and cited the critical need to boost productivity to achieve sustainable growth.
- Consumer prices in the eurozone fell by 0.1% year on year in March. It was the currency bloc’s fourth consecutive month of deflation, though it was an improvement on February’s inflation rate of -0.3% and January’s -0.6%.
- The Financial Times warned that the gush of global capital that flowed into emerging economies in the six years since the 2008-09 financial crisis is in most countries now either slowing to a trickle or reversing course to find a safer home back in developed economies. On an aggregate basis, the 15 largest emerging economies experienced their biggest absolute capital outflow since the crisis in the second half of last year, as a strong US dollar drove emerging market currencies into a swoon and investors grew nervous over the prospect of a tightening in US monetary policy, according to data compiled by ING.
- The services sector is an extremely important part of both the UK and the world economy, but is under-represented in trade data. Services account for around 75% of world GDP, but only around 20% of world trade. The UK is particularly competitive in services trade; it has the second-largest services trade surplus and the second-highest level of services exports in the G8 after the US.
- More signs emerged that the eurozone’s recovery is finally strengthening after years of economic stagnation. A closely watched poll of purchasing managers indicated activity in the region is now rising at its fastest pace since the spring of 2011. The flash purchasing managers’ index for the eurozone, compiled by data firm Markit, registered 54.1 this month, up from 53.3 in February and well above the crucial 50 level that marks an expansion in activity.
- The European Central Bank announced, via Twitter, that it had started its quantitative-easing programme, through which it expects to buy €60 billion) a month in bonds until September 2016. Yields swooned on government debt issued by eurozone members, entering negative territory on some shorter-term bonds. The euro fell below $1.06 to reach a 12-year low against the dollar.
- The PwC macroeconomics team launched its latest monthly Global Economy Watch, for March. This month's edition seeks to answer the question 'What would a Greek exit mean for the Eurozone?'
- A new Bruegel analysis, Welcome to the dark side: GDP revision and the non-observed economy, found that the shadow economy is much smaller in Western Europe than in Southern and Eastern Europe, as a % of GDP.
- The number of European Union countries with negative annual rates of inflation rose to 23 in January, leaving just five countries (Austria, Britain, Malta, Romania and Sweden) recording a rise, albeit anaemic, in consumer prices. The average EU inflation rate was -0.5%; in Greece it was -2.8%.
- Deloitte believes that in 2015, similar to 2014, eurozone economic recovery will crucially hinge on investment activity. While consumption in the Eurozone can be expected to increase slowly, and exports should be supported by higher world demand than in 2014, corporate investments are the most important area to monitor for positive and negative surprises.
- The PwC macroeconomics team launched its latest monthly Global Economy Watch, for February. The topics of oil prices, quantitative easing in the Eurozone and Greece's economic issues are featured in this month's edition. Please note the our economists intend to focus more closely on the Greek situation in the March edition.
- PwC economists analysed how the world could look in 2050, presenting economic growth projections for 32 of the largest economies in the world, accounting for around 84% of global GDP. See The World in 2050: will the shift in global economic power continue?
- The World Bank cut its forecast for global growth, warning that the world economy remained overly reliant on the “single engine” of the US recovery. The Bank said it expected lower oil prices to provide a boost to global activity. But it warned several headwinds would mitigate the effect of the falling cost of crude. These include weak confidence among consumers and businesses and the inability of big central banks to cut interest rates below their record-low levels to boost inflation expectations.
- The global crisis left many economies heavily indebted. But there are ways policy makers can repair the damage.
- The FT forecast that the world economy is extremely likely to grow in 2015. It has, after all, grown every year since the second world war, with the sole exception of 2009, the year of the global financial crisis, when it shrank 2% at market exchange rates and remained roughly constant at purchasing power parity. The International Monetary Fund believes the world economy will grow at nearly 4%, at PPP.
- The Economist forecast the rise of the "on-demand economy", which it believes poses difficult questions for workers, companies and politicians.
- Recent world trade data has shown a pick-up after a very flat period from last autumn until this summer. In the third quarter of this year, the CPB World Trade Monitor shows trade volumes rising at 2% above the previous quarter. So does this mean that the world economy is picking up, rather than slowing down as policy-makers fear? Not necessarily.
- The recent fall in oil prices took many people by surprise, but the underlying trends have been building for some time. The downwards price pressure is coming from increased US oil output, more competition from natural gas, weak GDP growth in the OECD and improving energy efficiency in the emerging world.
- The recent fall in oil prices took many people by surprise, but the underlying trends have been building for some time. The downwards price pressure is coming from increased US oil output, more competition from natural gas, weak GDP growth in the OECD and improving energy efficiency in the emerging world.
- Executives around the world remain upbeat about the prospects for business but this optimism is on the wane, according to the latest Economist/FT survey of around 1,500 senior managers, conducted by the EIU. The balance of respondents who think that global business conditions will soon improve has fallen by 29 points from the beginning of the year to 13%. The executives foresee a divergence in monetary policy.
- The FT asked: where has all the trade gone? Looking at the figures, a casual observer might conclude that globalisation is in crisis. Total trade in goods and services, having initially bounced back from the global financial crisis, has slowed sharply. Usually growing twice as fast as the world economy, it is underperforming gross domestic product for the first time in four decades. In reality, the situation is less dire.
- Global business confidence fell to a five-year low, claimed CNBC. According to a survey of 6,100 companies by Markit, the number of companies expecting their business activity to be higher in a years' time exceeded those expecting a decline by just 28%. This was below the net balance of 39% recorded in June, and the lowest since the survey began in 2009.
- A few months ago investors were feeling more optimistic about the eurozone., but that has all changed, warned The Economist. There are now serious worries that the eurozone will succumb to a “triple-dip” recession. Only Lithuania - which joins the euro zone on the first day of 2015 - and Ireland are forecast to see strong growth next year.
- The outlook for the global economy darkened again in the past month, claimed the EIU. Investors are concerned about the possibility of another recession, as demonstrated by declines in risk assets including equities, commodities and emerging market assets.
- Global market turbulence triggered the biggest outflows from emerging market equities in more than a year. Investors removed $9bn from stocks and shares across Africa, Latin America, eastern Europe and Asia in October, according to figures from the Washington-based Institute of International Finance, which tracks all cross-border investment into developing countries by non-residents.
- The Economist warned that the world economy is not in good shape. The news from America and Britain has been reasonably positive, but Japan’s economy is struggling and China’s growth is now slower than at any time since 2009. Unpredictable dangers abound, particularly from the Ebola epidemic, which has killed thousands in West Africa and jangled nerves far beyond. The risk of a new and painful downturn, though still small, is growing. That growing risk is due to the surprising and disconcerting re-emergence of monetary phenomena that haven't really been seen since the gold standard of the 1930s
- IMF member countries said bold action was needed to bolster the global economic recovery and they urged governments not to squelch growth by tightening budgets too drastically, although Germany poured cold water on the idea of a new global "crisis." With Japan's economy floundering, the euro zone at risk of recession and even China's expansion slowing, the IMF's steering committee said focusing on growth was the priority.
- Global economic recovery is stalling and too reliant on the US, according to the latest Brookings Institution-Financial Times tracking index. The index highlights a widespread loss of momentum in output growth across most emerging and advanced economies, prompting forecasters to scale back expectations for growth this year. The IMF is expected to cut its estimate of global growth in 2014 from 3.4% to a little over 3% as poor second quarter figures from Germany, Japan and other countries weigh on the outlook. As recently as April, the IMF was expecting 3.6% growth this year, faster than the long-term average.
- A “poisonous combination” of record debt and slowing growth suggest the global economy could be heading for another crisis, according to the hard-hitting 16th annual Geneva Report, commissioned by the International Centre for Monetary and Banking Studies and written by a panel of senior economists including three former senior central bankers, which predicts interest rates across the world will have to stay low for a “very, very long” time to enable households, companies and governments to service their debts and avoid another crash
- Commodity prices have dropped to their lowest level since the global financial crisis, hit by a strengthening US dollar, rising supply in key markets and concerns over faltering economic growth in China. The excess return Bloomberg Commodity Index, which reflects the price of 20 commodities and is tracked by billions of dollars of investor assets, fell to a fresh five-year low. The index has dropped more than 12% since the end of June as commodities such as crude oil, soyabeans, nickel and gold have fallen in the face of soft economic data from China – the world’s leading consumer of raw materials – and the prospect of a record grain harvest in the US.
- The OECD said the outlook had darkened for 2014 and 2015 for almost all the world’s large economies, partly as a result of one-off hits to growth early this year and partly stemming from geopolitical risks. The OECD revised down its forecasts for 2014 growth for all large economies except India.
- Deloitte's Global Economic Outlook, Q3 2014 suggested that the global economy appears to be settling into a new normal of modest growth in developed economies, stabilization of growth in emerging economies, and a decline in systemic risks emanating from policy mistakes. On the other hand, geopolitical risks appear to have reared their heads lately to a degree we haven’t seen in some time.
- The IMF sliced its 2014 global growth forecast from 3.7% to 3.4% after a "dismal" first quarter in the US and weakness in big emerging markets. Updating the forecasts in its World Economic Outlook, last released in April, the IMF said it expected growth to rebound during the rest of 2014 but warned that “downside risks remain a concern”.
- Leaders of Brazil, Russia, India, China and South Africa signed a deal to create a new US$ 100 billion development bank and emergency reserve fund. The capital of the bank will be split equally between the five participating nations. The Bank will he headquartered in Shanghai and the first President will be from India. Brazilian President Dilma Rouseff said "The BRICS countries have the power to introduce positive changes - ones that they think are more equal and fair".