Research

Forecasts and market analysis based on price assessments from Fastmarkets MB and Fastmarkets AMM

Change font size:   

March 2017 | World Economics


World Economics Monthly - Outlook

 

Your comment has been submitted and will appear once approved by the editor.

Thank you.
Your email has been sent. Thank you.

Go to the homepage.
Email article

All fields are compulsory

  • Please enter a maximum of 5 recipients. Use ; to separate more than one email address.

Email the editor

All fields are compulsory

Add Your Comment

All comments are subject to editorial review

Comments There are currently no comments to display for this article.

With US inflation heating up...
The annual rate of consumer price inflation in the USA accelerated from 1.7% to 2.5% between November and January, with the core rate accelerating from 2.1% to 2.3%. As recently as July 2016, the headline rate of consumer price inflation stood at just 0.8%. Producer price inflation, which was flat as recently as August 2016, accelerated to 1.6% in January 2017.

...the Fed appear likely to tighten again...
Mounting price pressure has increased the likelihood of the Federal Reserve increasing its funds rate again over the coming months (since late 2015, it has twice raised rates by 25 basis points, to 0.75%). A sharp rise in delinquency rates for sub-prime auto loans (4.9% of the outstanding balance of these loans was in at least 60 days of arrears during August 2016, up 22.0% year-on-year or y-o-y) illustrates that a significant number of US consumers may be vulnerable to increased interest rates.

...but the ECB remains dovish...
While inflationary pressure is also building in the eurozone, core inflation is much weaker than in the USA, reflecting the weakness of domestic demand – at least outside of Germany. As a result, the European Central Bank (ECB) remains comfortable with an accommodative monetary policy.

...even as the signs point towards accelerating growth
Economic growth remains relatively modest in the eurozone (at 1.7%, its annual rate of GDP growth almost matched that of the USA – 1.9% – in Q4), but it is beginning to make inroads into the region’s elevated unemployment rate. Moreover, there are signs that growth is beginning to accelerate. The Eurozone composite purchasing managers’ index (PMI) rose from 54.4 in January to 56.0 during February, its highest reading in almost six years. Similarly, the German Ifo Business Climate Index rose from 109.9 to 111.0 over the same period, its highest reading since August 2011.

US Producer and Consumer Price Inflation

Eurozone Real GDP Growth