GlobalForecasts for global economic growth for 2014 haven’t changed since the start of the year, even though the start was uneven and slower than expected in some areas due to bad weather. We still see global growth rising 3.1% in 2014, up from 2.4% in 2013.
USWe’ve been more optimistic about faster US economic growth in 2014 than most analysts, and our viewpoint was sorely tested by severe winter weather that seemed to impede economic progress. But recent data on employment, hours worked, retail sales and production collectively show a very strong spring rebound.
AsiaAsian central banks appear increasingly conscious of the risks to their banking systems from a potential housing market downturn. In most Asian countries, however, macroprudential measures that are already in place and a lack of significant leverage suggest limited scope for a systemic crisis.
AustralasiaThis week’s lower-than-expected consumer prices data will do little to sway the Reserve Bank of New Zealand (RBNZ) from raising interest rates again next week. But they underscore the fact that a lot of things need to go “right” in order for the RBNZ to deliver the hikes that are already priced. The risk is that they fall short.
EuropeWith a successful bond auction this week, Greece’s ambitions to exit its bailout late this year have taken an important step forward. We believe such a bailout exit is now more likely. However, with debt still at very elevated levels, many of the country’s fundamental problems remain unresolved.
JapanThe consumption tax hike on April 1 injects a large amount of uncertainty into Japan’s economic picture. It will be difficult for a while to discern the true underlying trend. Does greater uncertainty mean the Bank of Japan should be acting again?
EEMEAWith the US threatening sanctions against strategic sectors of the Russian economy, the likelihood of further escalation in the economic and financial war between Russia and the West has increased significantly. While Russia is in a better position to withstand an external financing stress now than in 2008, the loss of Western funding will be damaging for Russia’s economy.
Latin AmericaThe unusually dry season has depressed water levels in Brazil’s reservoirs, and a scenario of electricity shortages later this year can’t be ruled out. If energy rationing comes, it will hurt economic activity and the fiscal bottom line—possibly leading to a credit-rating downgrade.
CanadaIn 2013, Canada’s economy expanded by 2.0%—better than expected and up from 1.7% in 2012. But today, growth still relies too heavily on household consumption, and we see continued headwinds that may thwart a “great rotation” toward more balanced, diversified economic growth.