Sub-trend global growth set to continue - NAB

Research Team at NAB, have slightly lifted their forecasts for the UK and Emerging East Asia but the broad picture remains unchanged – sub-trend global growth of 3 to 3¼% should continue.

Key Quotes

“Neither the recent business survey readings, nor our leading indicator of global growth, nor recent information on global industrial output or trade point to a lift in the pulse of global economic growth. This matters because big debt burdens hang over large parts of the global economy – government and household debt in many advanced economies and corporate debt in big emerging markets. Faster growth is a better way to wind back debt overhangs than aggressive de-leveraging, a global economic vulnerability that worries the IMF.

We cannot see any dynamic new growth zone about to push global growth faster. Global growth remains concentrated in the emerging markets, which are driving around two-thirds of increased output. China and India are the top two engines of economic growth as Brazil and Russia (the 6th and 7th largest economies in the world) have been hit by deep recessions. The IMF thinks that global growth will reach 3.8% beyond 2017 but that reflects the fading away of recessions and the increasing shares of the fast growing Chinese and Indian economies.

With global growth remaining stuck in the doldrums and below target inflation, Australian business still faces global interest rates that remain very low by historical standards, even if the US Fed does lift its policy rates. Sub-trend global growth also puts a ceiling on the growth in commodity demand at a time when supplies are still plentiful, limiting the upside for commodity prices.”