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Macro Economic Review

Macroeconomic Review

    For the second quarter in a row, we see the global outlook for 2017 continuing to slightly improve thanks in part to upwards revisions to growth in the Eurozone and China (we have recently revised up our forecasts for both areas). Prospects are also improving for Japan according to consensus estimates.

    Within the major advanced economies, UK forecasts have ceased to improve this quarter and the outlook for the US remains unchanged (2.2% in 2017). One of the most significant developments during Q2 has been the dissipation of the Trump induced optimism in US data. US economic surprises peaked in late March and have been falling sharply since then. Indeed, latest readings are back at pre-election levels.

    On the contrary, the Eurozone outlook has continued to brighten as growth in the last quarter of 2016 was revised upwards and Q1 GDP growth beat forecasts at 0.6% QoQ. We have revised upwards our GDP forecasts from 1.7% to 1.9%. The strong momentum of domestic demand is underscored by a surge in consumer confidence to the highest levels since early 2001.

    Furthermore, world GDP growth has continued to improve also due to emerging economies. Particularly, it is clear that the drag from some major economies is diminishing. The surprising acceleration of Chinese growth and the exit from recessions in Russia and Brazil is clearly alleviating the drag they exerted on global growth.

    Finally, another welcome development in the international scene has been the recovery in world trade. This could validate the acceleration of global growth and constitutes good news for some more export-oriented areas, like the Eurozone. It can be also symptomatic of the failed implementation of Trump policies so far but be aware that risk continues: the risk of protectionist measures is not negligible as Trump retains more discretion about trade policies than over taxes and, as he fails to deliver on campaign promises, he could be tempted to act more aggressively on trade.


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