Global economy: Loss of upward momentum – Wells Fargo

Analysts at Wells Fargo, point out that the positive momentum for the global economy faded recently and risks have risen.

Key Quotes:

“At the start of the year, without major problems holding it back, the global economy broke from the gates with a fair degree of forward momentum; however, that has faded more recently. For evidence of that lost momentum, consider the year-over-year rate of global industrial production (IP) which earlier this year rose at its fastest pace since 2011 but slowed more recently. That measure is still signaling growth in global output, but growth at a slower pace. Global IP has slowed in each of the past two months, taking the year-over-year growth rate from 4.2 percent in January to 3.6 percent in March. Global trade was booming coming into the New Year, but this too has slowed sharply. The year-over-year rate of export growth has gone from a torrid pace of 5.8 percent in January, to just 1.1 percent in March.”

“While our U.S. forecast has been upgraded since last month, our global GDP growth forecast is unchanged and we are eyeing a number of developments with a degree of caution.”

“Global GDP is still forecast to come in at around 3.5 percent this year and next which would be in-line with the long-run average.”

“Sovereign bond markets in Europe generally have been quiet since the summer of 2015. However, volatility has revisited some of the familiar haunts in southern Europe more recently as political uncertainty in Italy and, to a lesser extent, Spain, has drawn the attention of global investors. With fragile coalition governments in the two   countries and ambitious fiscal plans for Italy’s new leaders, political uncertainty will remain elevated through the summer and likely beyond.”