Weekly Economic Briefing

Uneven improvement

22 April 2014

Global Overview

  • The global recovery is uneven: while advanced economy growth is accelerating in line with expectations, emerging markets are stuck in neutral.
  • As weather effects peter out, US and UK growth is gathering pace. While capacity utilisation rates in the US aren’t cause for worry yet, UK policymakers may need to start reining in excesses in the housing market.
  • The Euro-zone recovery is becoming more entrenched but this is unlikely to be sufficient to prevent further disinflation.
  • In Japan, Q1 growth will defy its longer-term drivers, with consumption brought forward ahead of the tax hike. This will prove a temporary fillip, with slowing trade and housing market auguring a slowdown.
  • Recent data shows that China continues to slow, and this may well be overstating activity. Expect the government to do more to prop-up growth to ease the economy towards rebalancing.
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US

March data suggests that although Q1 growth in the US will be weak, the picture is improving. The strong rise in capacity utilisation should not provoke undue worry about inflation.

UK

Activity indicators remain robust in the UK as the recovery deepens. If growth remains strong, the Bank of England should look to use macroprudential and monetary policy to prevent overheating.

Europe

The Euro-zone economy continues to recover, but the pace of improvement is insufficient to ward-off deflation risks. The European Central Bank should take immediate action to raise inflation.

Japan

Japanese growth is likely to pick up once more but many of the drivers are temporary and the longer-term headwinds continue to weigh on the outlook.

Emerging Markets

Chinese policymakers are still searching for an elusive balance to economic growth, with weak data in the first quarter prompting another mini stimulus and credit easing.

 

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.

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