Modest acceleration in global economic 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%.

Behind the monthly volatility, there has been a modest uptick in the still subdued underlying quarterly pace of growth in global industrial output. Quarterly growth picked up from 0.2% in late 2015 and early 2016 to 0.5% in June, before accelerating again to 0.7% in the 3 months to August – clearly faster but still marking a pace of output expansion that falls well below trend. We track industrial growth across a sample of important economies that enables us to get some impression of how things were faring up to September and again recent months have seen a modest pick-up in growth compared to the experience at the start of the year.

Monthly business survey readings provide the most up to date measure of the pulse of global economic growth – and they have been improving in the months leading up to October. Our measure of manufacturing activity in the big advanced economies has shown stronger growth in the 4 months to October than it did in the first half of the year. A broader business-survey derived measure of activity that covers both the advanced and emerging market economies hit a two year high in October. Services industry growth has been faster than for manufacturing and even a softer US outcome in October barely dampened the solid pace of expansion.

Growth in the big Southern Hemisphere primary product exporting economies was hit by the steep and broad-based decline in commodity prices seen through 2014 and 2015 – with $US non-fuel commodity prices falling by 26% between the starts of 2014 and 2016. This took a toll on exports and incomes in the commodity producers but prices have stopped falling, helping support growth in places like South Africa, South America, Australia and New Zealand.”