Still no sign of acceleration in global growth - NAB

Research Team at NAB, notes that the global economic growth remains soft with a sub-trend pace of expansion set to continue and few signs of an upturn.

Key Quotes

“The pace of economic growth remained stuck at around 3¼% yoy between late 2015 and mid-2016. Advanced economy growth was running at less than 1½% yoy while emerging market economies have been growing by 4½% yoy. As the advanced and emerging market economies each account for around half of the world economy, their combined outcome is a global growth rate of about 3%.

The CPB measure of global industrial output has been published to July and growth was still running between the 1% and 1½% yoy seen since late 2015. An upturn in emerging market economy industrial output has been offset by renewed weakness in the manufacturing sectors of the big advanced economies. We calculate a measure of industrial growth for a smaller array of countries that is available to August and it shows growth stuck around 1% yoy with falling output across many of the advanced economies. Finally, business survey readings are now available for September in the big advanced economies and they showed a modest uptick in activity from August’s weak outcome but business sentiment has only got back to its July level which was not strong.

While industrial output has been growing, albeit slowly, world trade continues to fare surprisingly poorly. Normally trade grows much faster than output, lifting the globalisation of economic activity. However, in recent years global trade growth has only been under 3%, less than the annual growth in GDP. The latest CPB measures of world trade shows flat trade in the first three months of 2016 and a fall of 0.8% in the June quarter and the weakness looks to have continued into the second half of the year. Lower commodity prices added an extra headwind to key Southern Hemisphere primary exporters but prices have been rising recently, reinjecting income back into those economies.

While manufacturing growth has been sluggish, services drive most economic activity and growth here has been stronger. The US service sector, in particular, has kept growing strongly.”