In December, we continued our Growth outlook for the next three months, reverting to Stagnation for the following nine months as we see the initial impact of U.S. tax reform on consumer and business behavior contributing to short-term U.S. growth. Global growth is expected to return to its trend rate of 3.7% in 2018 as GDP improvements spread around the world¹. The IMF expects only 6 of the 192 economies it covers to fail to grow in 2018¹. The end of the energy and commodities recession is a favorable trend. Capex is bottoming out and commodity exporters are doing better on stronger terms of trade.
This year should build on improvements we saw last year in developing and advanced economies. Brazil and Russia emerged from deep recessions, fiscal stimulus supported Japan and domestic demand buoyed the Eurozone. French President Emmanuel Macron announced structural reforms to the EU last year, aimed at addressing the tension between a single monetary policy and varying fiscal conditions among EU member states. Without reform, strong members like Germany would continue to boom, while weaker members like Italy would struggle. Negotiation outcomes regarding NAFTA will impact the U.S., Canada and Mexico and global trade. Both NAFTA and the WTO established new rules and standards for global trade upon which trade and financial globalization are now based. The demise of the deal and a view to bilateral agreements between the U.S. and it’s trading partners suggests that greater trade conflicts will become the norm, not only within NAFTA but also with China and others.