Executive briefing: Volatile politics, steady economies
- Geopolitical turbulence is increasing but that is not really impacting the short-run outlook or financial markets, as the economic situation is quite resilient.
- Future changes in central bank interest rates are increasingly likely to be upwards as economic picture has normalised, although we still expect a few more cuts in the US.
- Also the Nordic economies are more balanced, with clear improvement in Sweden, risk of a slowdown in Norway and a rise in both employment and unemployment in Finland.
- Underlying growth in Denmark is modest, but there are signs of more domestic demand.
- Financial markets are responding to the benign short-term global economic picture with higher bond yields and good performance in equities, credit bonds and risk-sensitive currencies.
The global economy continues to develop broadly in line with the stable, middleof-the-road picture outlined in our latest Nordic Outlook. The very delayed US GDP numbers for Q3 were stronger than expected with annualised growth as high as 4.3% but that number likely overstates the true strength of the economy as witnessed by indicators such as PMI’s and by a slightly increasing unemployment rate. Conversely, US inflation declined to 2.7% y/y in November which could be seen as a sign that the economy is cooling but also in this case, there are issues with the data which was likely affected by the government shutdown. Adding it all up, our impression is that the US economy is still running at a decent growth rate, supported by consumer spending and IT investment, and with inflation that is moderately too high. There is a similar picture in the euro area, except that inflation there is right on target. Domestic demand continues to look weak in China, but exports are strong, and there is in general positive signs coming from manufacturing in East Asia which now seems to have moved on from the US tariff increases.
Author
Danske Research Team
Danske Bank A/S
Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.
