United States

Annualised real GDP growth came in at −0.2% in Q1. Final sales fell 0.6% and inventories added 0.5 percentage point (pp) to growth in the first quarter. Consumer spending rose 2.1% and contributed 1.4 percentage points to GDP growth. Business investment fell 2.0% on a massive 18% plunge in non‐residential structures, while net foreign trade and government spending exerted 1.9 and 0.1 pp drags on growth respectively. The soft Q1 has led us to revise down our 2015 GDP growth forecast from 2.7% in April to 2.3% now. We expect the US economy to grow by 2.8% in 2016.…     

United States

GDP grew by an annualized 1.1% in Q1 2016 as final sales rose 1.3% and inventories shaved 0.2pp from growth. Consumer spending rose 1.5%, while residential investment surged 15.6%. Meanwhile, business investment contracted 4.5%, its worst performance since Q3 2009, and net trade added just 0.1pp to growth. We expect modest GDP expansion of 2% in 2016 and 2.3% in 2017, with domestic activity constrained by global headwinds.     

UK Overview

Downward revisions to the historical data have led us to downgrade our forecasts for GDP growth in 2015 and 2016 from 2.5% and 2.6% respectively three months ago, to 2.2% and 2.4% now. We expect the MPC to make its first move in Q4 2016, but the risks are becoming progressively more skewed towards a later move and we expect the FPC to use its powers sooner.     

Japan

After the 0.3% contraction in GDP in Q2 the economy appears to have at least stabilised in Q3. Domestic demand growth is being offset by declining exports. A softer outlook for H2 means we have downgraded our 2015 GDP forecast to 0.6% (from 1% in July). For 2016 we now expect growth of 1.5% instead of 1.8%.     

Forecast Overview

The monthly GDP data was particularly ‘noisy’ around the turn of the year, with a 0.3% m/m fall in December being followed by rises of 0.5% in January and 0.2% in February. This volatility has had the effect of dampening quarterly growth in Q4 2018 but boosting Q1 2019. Q1 was probably also boosted by precautionary stockbuilding by firms preparing for a “no‐deal” Brexit. We expect quarterly GDP growth of around 0.5% for Q1.     

Forecast Overview

Our short‐term forecasts for GDP growth have been revised up to 1.9% for 2016 and 1.2% for 2017, from 1.8% and 1.1% respectively three months ago. This reflects an upward revision to the Q2 result, plus a run of data that suggests the economy has withstood the shock of the EU referendum result better than had been feared. But we still expect the MPC to cut Bank Rate to 0.1% in November.     

Japan

GDP grew by a solid 1.7% in 2017, supported by strongly expanding global trade. For this year, we expect growth to ease to 1.2%, dampened by slowing external momentum and weak domestic demand in Q1. Although GDP dropped 0.2% q/q in Q1, we expect this setback to be temporary and look for reasonable, broad‐based growth during the rest of 2018. Monthly indicators of consumption and trade look positive and suggest a recovery in Q2. The outlook for investment also remains broadly positive, although sentiment has moderated somewhat since the start of the year. Protectionism, particularly the threat of US tariffs on Japanese cars, remains a key downside risk for our forecast.     

United States

Real GDP rose by 2.1% on an annualised basis in Q4 2016, with consumer spending up 3.5% and inventories contributing 1.0pp to growth. Despite solid “soft” data in Q1 2017, we see GDP growth slowing to less than 1.0% as back‐to‐back monthly declines in real consumer outlays constrain activity. Business investment and trade flows are firming only gradually, while rising inflation is taking a greater bite out of real income and spending.     

Forecast Overview

Though GDP rose by 0.2% in November, this came on the back of a poor run and, with July’s surge dropping out of the calculation, the rolling three‐month rate slowed to a six‐month low of 0.3%. The business survey data has also flagged a loss of momentum, with the Q4 composite PMI at its lowest level since Q3 2016. Based on past form, the PMI would be consistent with virtual stagnation in GDP in Q4, but our short‐term model points to a slightly firmer outturn of 0.3%. This would mean that 2018 as a whole saw GDP growth of 1.4%, 0.1pp higher than our forecast from three months ago, which reflects favourable historical revisions published in the Q3 national accounts release.     

Japan

Data from Q3 have been quite mixed, but on balance suggest that the fallout from April's sales tax hike has been worse than initially expected. The composite PMI reached a six‐month high of 52.8 in September, but the Cabinet Office's index of coincident indicators has continued to fall through Q3. On balance, we estimate that GDP was virtually flat in Q3. We thus now expect growth for 2014 as a whole to come in at 0.7%, down from 1.1% three months ago…     

United States

Annualised real GDP growth was revised to a staggering 5% in Q3 2014, the strongest reading since 2003, as final sales advanced 5% while inventories were neutral for growth. Consumer spending growth was revised up from 2.2% to 3.2%, mostly on stronger services spending, while business investment grew by 8.9%. Net foreign trade was a significant positive factor driving GDP growth in Q3, contributing 0.8 ppt, while government spending was revised up modestly to 4.4%. We expect the economy to have grown by around 3% in Q4, resulting in GDP growth of 2.4% in 2014 overall, with a 3.3% expansion forecast for 2015…     

United States

Real GDP growth slowed to an annualised rate of 1.4% in Q1 2017 from 2.1% in Q4 2016. Growth in Q1 was constrained by weak consumer spending and inventories, while residential and business investment rose strongly. But, we believe this lull will be short‐lived and forecast a rebound in GDP growth to around 3.0% in Q2. The factors that constrained consumer spending, including higher inflation, unusually warm weather and slower tax refunds, were not repeated in Q2.     

World economy

Following estimated GDP growth of 2.3% in 2016 – which was the lowest since 2009 – we expect the global economy to accelerate this year. We forecast GDP growth at 2.6% in 2017 and then see it accelerating further to 2.9% in 2018.     

Europe

The Eurozone economy gathered pace through Q1, with the composite Purchasing Managers' Index (PMI) rising to a 32‐month high in February, which was followed by a similar reading in March. However, the improvement in a number of forward‐looking indicators has eased. The EC's business survey showing firms' expectations for orders growth plateaued during Q1. And while firms are no longer shedding workers, there seems little appetite to create jobs, constraining prospects for household spending. We expect the pace of GDP growth to remain around 0.3% per quarter for the remainder of the year…     

World economy

Following estimated GDP growth of 2.3% in 2016 – which was the lowest since 2009 – we expect the global economy to accelerate this year. We forecast GDP growth at 2.7% in 2017 and then see it accelerating further to 3.0% in 2018, both 0.1 percentage points up from our previous projections from January.     

World economy

Following estimated GDP growth of 2.3% in 2016 – the lowest since 2009 – we expect the global economy to accelerate this year. We forecast GDP growth at 2.8% in 2017 (which is up 0.1 percentage points up from our previous projections from April) and then see it accelerating further to 3.0% in 2018 (unchanged).     

World Economic Prospects Monthly

Overview: Global growth resilient to trade slowdown

• ? It seems increasingly clear that the manufacturing‐ and trade‐driven soft patch in late‐2018 is extending into this year. But we still think that global recession risks remain low and see no reason to make any notable shifts to our outlook for the global economy this year. We continue to forecast that GDP growth will slow from 3.0% in 2018 to 2.7% this year, with a similar outcome seen in 2020.
• ? Various indicators show that trade volumes slowed sharply at end‐2018 and survey indicators for January suggest that the situation has not improved since then (see Chart). The main reason for this weakness has been China, where imports ended the year on a very weak note and we expect a further slowdown in Q1.
• ? We have lowered our forecast of Chinese imports in 2019 by around 1.5pp in response. However, we expect a bounce back in Q2 and beyond; reflecting this, Chinese import growth over the year as whole is still expected to be notably stronger than in the 2015/16 soft patch. In a similar vein, while global trade growth is expected to slow sharply from 4.6% to 3.3% this year (down from 3.6% last month), it should still be stronger than in 2012–16, providing a solid backdrop for exporters.
• ? Meanwhile, financial markets have rebounded sharply from the December sell‐off due to renewed optimism regarding US and China trade talks and a more dovish Fed. We now expect the Fed to leave rates on hold until at least Q3 and hike rates only once this year. This, along with lower government bond yields and weaker inflation, is also likely to reduce the need for monetary tightening elsewhere, particularly in emerging markets (EMs), helping to support global growth later in the year.
• ? Overall, we still see global GDP growth softening in H1, but with a modest rebound in H2 as Chinese growth stabilises and EMs and European growth regain momentum. Sharper slowdowns in China and global trade and financial‐market weakness remain key concerns for the 2020 outlook. But the risk of inflation‐induced policy tightening is still low and the odds of a renewed flare‐up in trade tensions have ebbed lately.

     

United States

Real GDP grew by 1.4% on an annualised basis in Q4 2015, with final sales rising by 1.6% and inventories shaving 0.2ppt from growth. Consumer spending rose by 2.4%, while residential investment capped off a strong year with a 10.1% advance. The major drags on growth came from net trade and business investment. We have revised down our 2016 GDP growth forecast to 2.0% on expectations of a weaker Q1, while our view on 2017 remains at 2.4%. The picture is still one of solid domestic fundamentals being constrained by global headwinds.     

World Economic Prospects Monthly

Overview: World GDP now seen falling 2.8% in 2020

• ▀ With much of the global economy now in some form of lockdown due to the coronavirus pandemic, we expect world GDP to contract by about 7% in H1 2020. Activity is expected to rebound sharply in H2, but even so the severity of the shock is likely to lead to a permanent GDP loss for the global economy.
• ▀ While Chinese activity picked up in late-Q1 as lockdown restrictions were unwound, we expect Q1 GDP to have fallen 12% q/q before rebounding sharply in Q2. But this Q2 boost looks set to be swamped by the collapse in activity caused by the rest of the world going into lockdown.
• ▀ Although shutdown restrictions elsewhere are less severe than those imposed in China, business survey and labour market data still point to sharp falls in activity in most countries in Q2. Quarterly GDP declines of 8% or more in the US and eurozone seem likely. Overall, world GDP could fall by about 7% in H1, roughly double the size of the contraction during start of the global financial crisis in 2009.
• ▀ In those economies subject to some form of lockdown, we expect restrictions to begin to be lifted during Q2. As a result, growth should resume in Q3 as sectors that have been forced to shut down see some pick-up. But despite this rebound, world GDP is now seen shrinking 2.8% in 2020 overall — in 2009, the global GDP fall was 1.1%.
• ▀ The H2 pick-up, followed by a return to more normal conditions next year, will result in world GDP growth rising to almost 6% in 2021, helped also by the recent collapse in oil prices to about $30pb. But the scale of the disruption means that we expect a permanent loss of output from the shock. We expect global GDP in the medium term to be some 1.5% below the level we had anticipated before the coronavirus outbreak.
• ▀ The risks around this forecast are large and broadly balanced. But were stringent lockdowns or widespread disruption, perhaps due to renewed outbreaks of the virus, to extend into Q3, global GDP could fall by as much as 8% this year.

     

Europe

GDP growth is likely to have slowed after a healthy 0.6% gain in Q1. For now, we expect a 0.3% rise in Q2, but our GDP indicator suggests an even smaller gain.