Global growth rising toward trend pace as advanced economies lift – NAB

After slowing through 2015 and the first half of last year, the pace of global growth started picking up from mid-2016, noes the research team at NAB.

Key Quotes

“Growth bottomed out at 3% yoy in the June and September quarters of last year but it picked up to 3.2% in late 2016 and early 2017 before accelerating again to 3.3% in June quarter 2017. Consequently, world economic growth looks to be headed back to the 3½% trend rate seen since 1980 for the first time since mid-2015.”

“The most up to date monthly information on industrial output, orders and world trade shows growth continuing into the second half of the year. New industrial orders have kept growing across key economies like Germany, the US, Italy, South Korea and Taiwan. While recent orders growth has been less impressive for Japanese investment goods and Canadian manufacturing, the overall global trend looks to be one of solid growth.”  

“Trend growth in global industrial production lifted from less than 2% yoy in late 2016 to around 3¾% yoy through June and July. There are a few signs that upward momentum in growth was fading around mid-year with the pace of industrial growth in the CPB global data no longer ramping up at the rate seen earlier in the year. Although the rate of growth remains solid, August data for industrial output in a wide range of economies shows that growth is not accelerating in the way it was through the early months of the year.” 

“Faster industrial growth in the big advanced economies accounts for much of this global industrial upturn, a trend reflected in broader measures of economic activity like GDP. Advanced economy growth picked up from 1¼% yoy in the first half of 2016 to over 2% yoy by mid-2017 and the business surveys are pointing to solid growth continuing into the second half of the year. The US and Euro-zone have driven most of this upturn in advanced economy expansion, with the US being one of the stronger performers through the postGFC recovery while the Euro-currency block fared much worse, weighed down by peripheral country debt crises. As the Euro-zone is the third biggest global economic unit, after China and the US, better growth numbers in Europe will have a clear impact on the bottom line for global GDP.”