Global growth: Few brighter indicators but sub-trend growth set to continue - NAB

Research Team at NAB, notes that the global growth remains sub-trend and policy is still focussed on getting higher rates of output expansion and shifting inflation up towards target.

Key Quotes

“The gloom should not be overdone, however. Given the number of shocks and growth scares that the global economy has had to weather in the last few years, we could easily have done worse than the outcome of ongoing moderate economic growth. Superimposed on shocks like Brexit, past volatility in the Chinese currency and share market and the ups and downs of global equities is the aftermath of the 2008/9 global financial crisis and accompanying recession. That resulted in higher public debt burdens and smaller economies than would have occurred otherwise, contributing to a debt overhang that modest rates of income growth perpetuate.

We expect more of the same with our forecast of a modest lift in global growth based more on the passing of temporary weakness in some big economies than the emergence of new engines of economic expansion. Recessions gradually fade in Brazil and Russia and the recovery in commodity prices helps primary product exporters, reducing their drag on global growth. Ongoing low inflation and modest growth in the big advanced economies should mean a very gradual movement by their central banks away from exceptionally low interest rates and significant asset buying.

Recent business surveys and industrial output show a slight lift in the pace of near term growth as does our leading indicator. Central bank policies designed to support demand and the shift away from budgetary austerity would be expected to eventually bear some fruit in terms of faster growth but there seems growing official acceptance that an already prolonged period of slow growth will continue.”