Global Economics
Highlights
Despite signs of slowing, there is still cause for optimism
A number of weaker than expected indicators suggest that the economy is slowing down as it did in H1 last year. However, some of the weakness probably reflects a payback from the mild winter boost to activity and this payback is probably near completion. And the discouraging indicators are contradicted by others that remain relatively reassuring.
Growth is expected at 2.3% in 2012Q2 but should strengthen moderately in the second half of the year. A mild stumble is expected early in 2013 due to fiscal tightening, but on an annual basis growth should pick up to 2.7% next year from 2.4% this.
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Break-up fears intensify again
Concern about a possible Eurozone break-up has intensified following the inconclusive outcome of the Greek elections. Our baseline continues to assume that a break-up is avoided but should Greece decide to leave the Eurozone (by reneging on the terms of its second bailout), pressure on other peripheral countries would be immense.
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Emerging middle class to drive global growth
Consumers in the G7 countries have been the primary source of demand in the global economy for the last 25 years, and over the same period the emerging markets have established an increasing share in the supply of goods to the world.
But following the global financial crisis of 2008/09, the Eurozone is struggling under the weight of huge debts and the US is growing only modestly. In these areas, consumer spending is expected to be very subdued, while in contrast growth in the emerging markets is forecast to far outpace that in the advanced economies. Oxford Economics forecasts for household incomes show that the number of emerging market households enjoying higher incomes will grow sharply over the next ten years; indeed, the number of households in the emerging markets enjoying an income of over US$30,000 will more than double to 149m by 2020, overtaking the US (120m) and the Eurozone (116m).
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14 May 2012
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Credit Crunch Watch:
US stress levels rose over the last week, mostly due to higher equity volatility. US stocks have dropped back around 4.5% from the peaks of early April with around three-quarters of this correction since the start of May, in part due to a series of weaker-than-expected data releases. Meanwhile, Eurozone 'peripheral' bond spreads widened on the back of the Greek election results and further bad news from the Spanish banking sector
11 May 2012
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Country Economic Forecasts
These concise reports provide regular analysis and forecasts on economic conditions and policy developments in 191 countries. They include downloadable spreadsheets covering 10-year forecasts and 20 years of historical data for key economic indicators.
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