Global outlook: economic growth improved slightly

Analysts from the Research Department at BBVA forecast that the global economy will have a third quarter quite similar to the first two. Their model estimates that the global momentum in the third quarter will again be around the growth trend of recent years, 0.76% (q/q).

Key Quotes:

“In the last three months the global economy has continued the moderate trend of previous quarters, with growth rates of around 3%, well below the pre-crisis rates. In this period, global aggregate data have partially improved or have slowed their decline but one of the risks mentioned for mid-year has materialized – the result in favour of Brexit in June – which leads us to lower our forecasts in Europe. On the other hand, the quarter was also marked by the Fed’s delay in normalizing interest rates amid doubts about the situation of the US economy, its long-term growth and global risks.”

“Our initial estimates based on the BBVA-GAIN indicator for the second quarter (0.78% QoQ) suggest that global growth remained close to the average for the past five years. Thus, and as in the first quarter, the world economy is finding it difficult to achieve more than limited growth. The most recent indicators seem to confirm this diagnosis. Industrial production shows a neutral trend changing only in April and May, when it was slightly positive. This situation results from the behaviour of the emerging economies, specifically the Asian ones, as developed countries show no signs of recovery. Confidence indicators give rather more grounds for optimism, with impetus seen in June as a result of developed countries' responses, while our indicator of global trade in goods shows strong momentum in June, after months of weakness.”

“This, together with a reduction of financial stresses in both developed and emerging countries, leads us to forecast a third quarter quite similar to the first two. Indeed, our BBVA-GAIN indicator estimates that the global momentum in the third quarter will again be around the growth trend of recent years (0.76% QoQ), which is consistent with a global growth for 2016 of the order of 3.1%.”

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