Global upturn keeps going as risk/uncertainty measures slide – NAB

Analysts at NAB explain that the lift in advanced economy growth has helped drive global growth toward trend and both the business surveys and their leading indicator point to continued expansion.

Key Quotes

“There are a few signs that the rate of growth could be peaking in the advanced economies but it is too early to be certain.” 

“Emerging market economies account for most global output expansion and their growth could now start to improve – China’s economy has avoided the much discussed “hard landing”, the impact of the policy changes that have held back Indian growth should pass and the Russian and Brazilian economies are now gradually recovering. As these economies cumulatively represent one-third of the global economy, that helps explain the lift in global growth to a slightly above trend 3.6% in 2018 from 2017’s 3.4%.”  

“Measures of risk and uncertainty have faded as the upturn has kept going. Financial market volatility has been trending down since early 2016 and it is now lower than before the GFC. Uncertainty over economic policies spiked in the wake of the Brexit vote and the election of President Trump but policy uncertainty indices have fallen back in the wake of market-friendly outcomes in the French and German elections.”  

“Many of the most severe tail risks – low probability high impact events that would really damage the global economy – have faded in the last few years. The Euro-zone has not collapsed, the world has not fallen into deflation, monetary policy has not been aggressively tightened, US-China trade tensions have risen but full-scale global trade wars have not broken out. In their place, new risks have loomed into view – especially the geo-political situation involving North Korea and the political unrest in Spain where the Catalonian government is pushing for independence.”