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- Title
World Economic Prospects.
- Abstract
Overview: Forecasts steady but near-term signals mixed Our world growth forecasts are steady this month, at 2.3% for 2016 and 2.7% for 2017., One factor behind the more stable outlook is the rally in financial markets since mid-February. This rally appears to have been the result of a number of factors including a more dovish Fed and an improvement in some near-term economic indicators., The implied 12-month ahead Fed funds rate dropped around 0.5% from its January peak to mid-February and remains around 0.35% lower now. So the Fed still apparently has the capacity to boost markets with changes in communication policy., The Citigroup economic surprise indicators have also improved over recent weeks, especially for emerging markets where the indicator is back in positive territory. The G10 index nevertheless remains clearly negative., Other economic signals are mixed. The latest reading of OE's world trade indicator (based on survey evidence for March) suggests a modest improvement, although again the indicator continues to signal weak world trade growth., Meanwhile, there have been some warnings of potentially softer labour market conditions. Though payrolls gains have remained solid, a weighted sum of the employment subindices of the US ISM surveys has dropped sharply over recent months. A similar index for the Eurozone is more positive, although it has also softened from its late-2015 peaks., These mixed signals suggest limited likelihood of near-term upgrades to the world growth outlook and overall we maintain our view from last month that risks look skewed to the downside - so that further monetary policy stimulus remains a possibility., This assessment appears to be shared, to some extent at least, by global bond markets. US 10-year yields have dropped back to only 1.7% since mid-March (only 0.1% above their February lows), with German yields at just 0.1% and Japanese yields at - 0.1%. So the 'great squeeze' on G7 bond yields is still continuing.
- Subjects
ECONOMIC forecasting; ECONOMIC development; FINANCIAL markets; ECONOMIC indicators; LABOR market; FEDERAL funds market (U.S.)
- Publication
Economic Outlook, 2016, Vol 40, p1
- ISSN
0140-489X
- Publication type
Article
- DOI
10.1111/1468-0319.12207