Monthly Economic Outlook
This year’s Jackson Hole conference was rather disappointing in the sense that it didn’t deliver much out-of-the-box thinking with regards to monetary policy. US policymakers, meanwhile, highlighted that the case for a second rate hike has become stronger.
Discover the comments of Hans Bevers in this video:
- Global economic activity remains subdued and inflation mostly surprises on the downside. Encouragingly, there is a growing awareness about the need for more expansive budgetary policies. This could translate in stronger economic activity and higher inflation prints. At the same time, statements remain vague implying that actual implementation might take time.
- In the United States, the combination of the latest drop in manufacturing confidence, Q2’s disappointing GDP number and below target inflation, suggests a summer rate hike is off the table. The Fed continues to adopt a very cautious wait-and-see approach as has been the case for several years now. The November Presidential elections are drawing lots of attention. As things stand, according to election polls, Mrs Clinton is leading the race to the White House.
- In Europe, most confidence indicators in the immediate aftermath of the Brexit vote are holding up. This suggests that the fallout on Eurozone economic activity remains limited. Trade negotiations between the UK and the EU still need to start and this looks set to be a complex and prolonged negotiation process against the back of a challenging political calendar with Dutch, French and German elections in 2017. The Eurozone’s recovery is still far from spectacular, keeping the ECB in easing mode. What’s more, confidence indicators are not pointing to further growth acceleration and structural headwinds remain strong. Meanwhile, it’s becoming more likely that Spain will see a third round of elections. Italy’s upcoming constitutional referendum (on reducing the power of the Senate) also seems challenging: a ‘yes vote’ is far from assured.
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