Outlook 2018: Global macro outlook
- Global GDP should accelerate further in 2018, peaking at 3.8% (after 3.7% in 2017), reflecting a robust expansion in the US and the Eurozone as well as improvement in several emerging markets.
- 2018 should leave subdued core inflation behind in the US while reflation should be more modest in the Eurozone and Japan.
- While the US Fed will continue its gradual tightening (three rate hikes and balance sheet unwinding), we see global quantitative easing peaking in 2018, with asset purchases from the BoJ and ECB offsetting the Fed’s quantitative tightening.
- This upbeat macroeconomic backdrop (somehow the opposite of stagflation) could be derailed by inflation surprising on the upside, clearly a growing concern.
Peak global growth
We expect global growth to peak in 2018 at 3.8%, its highest pace since 2011 (Exhibit 1). First, 2018 is set to start on a solid base, as the economy has been accelerating throughout 2017. For example, US quarterly GDP growth is closing 2017 at 3% (on an annualised basis) versus just 1.8% at the end of 2016.
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