Global Macro Views

We expect global growth in 2016 to show a modest increase as developed countries generally continue near 2015 growth levels, emerging Asian countries continue to slow gradually and energy exporters benefit somewhat from positive base effects following a difficult 2015. Global slack, particularly in manufacturing will continue to weigh on economies with higher exposures to global trade and provides downside risks to inflation outlooks for most countries with the exception of emerging countries with flexible exchange rate regimes.

In developed countries, accommodative monetary policies offer ongoing support for economic growth at or above potential rates in the context of lower overall potential growth rates as aging demographics and low worker productivity provides headwinds to the supply side of developed economies. Consumption, particularly in services continues to be supported by improving labor markets and lower energy costs though global financial and economic uncertainty present downside risks to consumer sentiment including what we feel to be a 40% probability of a Brexit later this year.

In emerging economies, concerns around a hard landing for China and commodity price weakness continue to dominate the outlooks for 2016. China will likely continue to moderate their growth rate but avoid a hard landing while the recessions in Russia and Brazil are expected to continue but at a modestly less severe pace. The balance of risks to global growth in coming quarters are primarily driven by emerging economies while global inflation risks remain subdued outside of countries such as Brazil and Russia which continue to experience higher inflation driven by weak currencies.

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