Advanced economies to drive lift to above trend global growth – NAB

A broad-based economic upturn continues across the global economy driven mainly by the advanced economies, according to analysts at NAB. 

Key Quotes

“Third quarter output data is now available for big economies that account for over half of global GDP. Growth in the US and Euro-zone, the second and third largest economic blocks, was running around 2½% yoy in the September quarter. The pace of expansion in the big emerging market economies continues to be robust with growth in China (the world’s biggest economy) of 6.8% yoy and in Indonesia (the seventh biggest economy) of 5% yoy. As the impact of demonetisation and the introduction of a GST gradually fades in India, growth should lift in the world’s fourth largest economic block.”   

“Timely data on industrial output and surveys of business sentiment show the industrial sector in the advanced economies has experienced a particularly marked improvement in conditions. Growth in industrial output picked up to around 3% yoy by August and preliminary data for September shows still strong growth.  Similarly, readouts from the monthly purchasing manager surveys, available to October, are consistent with solid expansion in manufacturing and are far more buoyant than last year. Advanced economy business surveys show sentiment in the industrial sector matching that of the normally more buoyant service sector.”    

“Inflation has remained moderate through this acceleration in global growth.  Headline consumer price inflation in the advanced economies has risen from practically zero in 2015 to much nearer the 2% inflation target adopted by several key central banks.  Much of that increase reflects higher prices for energy and food, and excluding those volatile commodity items “core” CPI inflation has been stuck in a 1¼% to 1½% range since early 2013.  In contrast, headline inflation in the emerging market economies has been trending down through the last 7 years to reach around 4% yoy in August 2017.  Again, higher commodity prices have lifted the headline rate with core inflation running around 3½% yoy.”     

“A commodity-market related surge in producer price inflation was evident across both advanced and emerging market economies.  Price pressures have risen lately but remain below that seen at the start of the year.”