Weekly Economic Briefing

Quiet strength

06 December 2016

Global Overview

  • Political events have overshadowed genuine broad-based economic improvement, especially in developed markets, led by gains in the US, UK, and Eurozone. Data suggests the economic backdrop will remain supportive but political risks linger.
  • US economic data is firming heading into the end of the year. Labour market data showed a sharp fall in the unemployment rate and real retail sales continued their improving trend.
  • Defying economists’ expectations, the UK and Eurozone both continued their solid momentum. The failed Italian referendum could increase uncertainty and reduce European confidence but the ECB has options to offer support.
  • Improving global trade has boosted the outlook for developed Asian economies. Despite a suffering shipbuilding sector in Korea and weak domestic demand in Japan, net exports have begun contributing positively to growth.
  • If OPEC countries can comply with supply-side measures, higher commodity prices can reduce the risks associated with tighter US monetary policy and a stronger dollar, especially for the most vulnerable commodity-exporting EMs.
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US

While market and media attention remains focused on Trump’s transition to power, the economy itself is quietly building momentum.

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UK

Survey data suggest that the UK economy continues to grow solidly. However, next year is likely to be more challenging and fiscal policy will be a hindrance, rather than a help.

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Europe

The economic upswing continues in the Eurozone on both hard and soft metrics. However, Italy illustrates the impact politics can have on the economic outlook.

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Japan & Developed Asia

The deviation in sentiment readings in Taiwan and Korea reflects industry shifts, but their economies remain entwined.

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Emerging Markets

EM economies softened slightly following the bout of dollar strength but the prospect of an OPEC production agreement can support the most vulnerable economies.

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Standard Life Investments’ Global Strategy team provide regular analysis of the key economic data that has been influencing financial markets.

Available on a weekly basis, the Weekly Economic Briefing takes a detailed look at the global economic issues that have been impacting our investment strategy. The regional approach aims to provide an easy-to-navigate guide to the most recent developments in the global economy.

The views and conclusions expressed in this communication are for general interest only and should not be taken as investment advice or as an invitation to purchase or sell any specific security.

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