State of the Economy: June 2018

Global Summary

Stronger global growth forecast amidst trade tensions.

• The global economy grew 3.8% in 2017 – its fastest pace since 2011.

• Stronger growth in Advanced Economies has been driven by higher investment and accommodative monetary conditions.

• In Emerging Market and Developing Economies, stronger growth has been driven by faster consumption growth and a pick-up in commodity prices for exporting countries.

• Global activity indicators softened in Q1 2018 alongside an increase in global trade tensions.

• Underlying momentum is expected to persist with the IMF forecasting growth to accelerate to 3.9% in 2018 and 2019.

Stronger US GDP growth forecast for 2018.

• US GDP growth accelerated to 2.3% in 2017 (1.5% in 2016), with a pick-up in non-residential fixed investment and exports. Quarterly growth eased slightly in Q1 2018 to 0.5%.

• The US labour market has remained tight at the start of 2018 with unemployment falling to 3.8% in May while earnings growth has remained broadly stable.

• US CPI inflation continued its upward trend in May to 2.8% with further upward pressure expected from robust domestic activity (supported by tax cuts) and rising energy prices.

• US GDP growth is forecast to accelerate to 2.9% in 2018 before easing slightly to 2.7% in 2019.

Stronger Euro Area growth forecast for 2018.

• Euro Area growth accelerated in 2017 to 2.5% (1.7% in 2016), however, quarterly growth softened in Q1 2018 to 0.4%.

• The Euro Area unemployment rate fell slightly in April to 8.5%; the lowest rate since December 2008.

• Euro Area CPI inflation rose to 1.9% in May (1.3% in April) with Services and Energy driving the increase.

• Euro Area GDP growth is forecast to accelerate to 2.4% in 2018 supported by stronger underlying economic sentiment.