Fitch revised up world GDP growth forecasts

With the recent flow of good news on the world economy, Fitch Ratings has revised up 2017 and 2018 world GDP growth forecasts.

world gdpThe recent flow of good news on the world economy has continued, with Fitch now revising up its 2017 and 2018 world GDP growth forecasts to 3.0% (from 2.9% in June) and 3.2% (from 3.1%), respectively.

The revisions are led by emerging markets and China in particular, whose recovery has been more pronounced than anticipated. But data continue to suggest a synchronised global expansion across both advanced and emerging market economies” said Brian Coulton, Fitch’s Chief Economist.

Real Chinese GDP grew by 6.9% yoy in 2Q17 (above the 6.7% estimate in the June GEO) and nominal GDP growth has risen to over 11% yoy this year, up from a low of 6.4% in 4Q15.

US GDP grew by 0.6% (non-annualised) in 2Q17. The recovery in business investment growth continues and survey indicators point to further gains ahead. Fiscal easing is still expected to provide a modest boost to growth next year and export demand is picking up. The Fed appears confident in sticking with its normalisation path despite a recent dip in inflation readings and they are likely to commence partial reinvestment of maturing bond holdings in the next few months.

In the eurozone, growth picked up to 0.6% in 2Q17 with positive surprises in both France and Spain.

The slowdown in the UK since late 2016 was confirmed with the 2Q17 GDP release, revealing that growth remained subdued at 0.3%. Declining real incomes and a household saving ratio that is already at a 50 year low suggest that consumer spending will slow further. Brexit uncertainties will weigh heavily on investment this year and next.

Japan’s economy has continued to show signs of domestic and external strength with consumer spending supported by a tight labour market and corporate loans growing at their fastest pace for a decade. Fitch 2017 growth forecast has been upgraded to 1.3%.