Global growth rising toward trend pace as advanced economies lift – NAB

After slowing through 2015 and the first half of last year, the pace of global growth started picking up from mid-2016, points out the research team at NAB. 

Key Quotes

“Growth bottomed out at 3% yoy in the June and September quarters of last year but it picked up to 3.2% in late 2016 and early 2017 before accelerating again to 3.3% in June quarter 2017.  Consequently, world economic growth is now heading back to the 3½% trend rate seen since 1980 for the first time since mid-2015.”

“This upturn in global growth has been driven by faster economic expansion in  the big advanced economies where growth has picked up from around 1¼% yoy in the first half of 2016 to over 2% yoy in June 2017.  Emerging market economy growth, by contrast, has flatlined at just under 5% yoy since late 2015, held down by a combination of the fairly steady rate of Chinese economic expansion, recessions in Russia and Brazil and the disruptive impact of big changes in economic policy on Indian GDP.”

“Cyclical changes in the pace of global growth tend to be seen most clearly in the pattern of world trade and industrial output – they tend to show the earliest and biggest swings in activity, exceeding the fluctuations in the service industries that generally form the bulk of GDP.  Global industrial growth picked up from 0.6% qoq in March quarter 2017 to 1.2% qoq in June with rising momentum in both the advanced and emerging market economies. Comparisons of both industrial output and world trade with year-earlier levels shows the upturn most clearly.  Industrial growth in the advanced economies has accelerated from practically nothing in mid-2016 to around 3% yoy a year later.  Comparable growth measures for world trade show growth now running around 4% yoy.”

“While global growth has picked up, price pressures remain muted.  There was a commodity-driven run-up in producer prices but that has faded and it did not feed into much of a lift in global consumer price inflation.  If anything, CPI inflation seems to be slowing, falling short of the 2% inflation targets adopted by many advanced economy central banks.  Recessions lowered previously high inflation in Brazil and Russia, progress has been made in  lowering India’s high inflation and Chinese CPI inflation is only  1½% yoy.”