EuroWire May 2017

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Transatlantic cable
May 2017 30
† The arti cial Sun at Jülich cost a total of $3.77 million,
most of which was provided by the state of North
Rhine-Westphalia. Germany’s Federal Ministry for Economic
A airs and Energy (BMWi) contributed $1.2 million.
World economics
Stronger performances from key
economies bode well for global trade ows,
but protectionism is a looming threat
Based in Barcelona, Spain, FocusEconomics provides analysis and
forecasts for 127 countries as well as price forecasts for 33 key
commodities. Its monthly Consensus Forecast Report for Major
Economies, informed by a global network of analysts, contains
macroeconomic projections developed from over 250 sources.
The 1 st March edition, written by senior economist Angela
Bouzanis, presented data for rst-quarter (Q1) 2017 indicating
that “faster global growth could be here to stay.” The most recent
Consensus showed an upward revision to growth prospects for
major economies such as the Eurozone and the United Kingdom.
But it also took note of a gathering threat to that momentum: a
rise in the protectionist sentiment rippling through the global
economy.
Here, condensed and edited, are Ms Bouzanis’s appraisals of
signi cant economic areas:
UNITED STATES: Upbeat economic data continues to emerge
from the USA economy despite a turbulent political atmosphere.
After gross domestic product (GDP) growth slipped in the nal
quarter of last year, leading indicators suggest a rming-up in
Q1 2017. In January, employers added jobs at the quickest pace
in four months and the manufacturing index of the Institute for
Supply Management (ISM) rose to an over-two-year high.
Solid consumer spending and stronger energy-related
investments should drive an acceleration in growth this year.
The FocusEconomics panel sees US GDP expanding 2.3 per cent,
topping its 1.6 per cent for 2016. For 2018, the panel sees growth
picking up slightly to 2.4 per cent.
EUROZONE: Recovery in the Euro area remains on
track, building on the healthy economy of Q4 2016. The
unemployment rate fell to a multi-year low in December and
economic sentiment held fast at a high level into the New Year.
The manufacturing purchasing managers index (PMI) hit a
70-month high in February and the respondents’ con dence
was high. This positive economic data is lifting the Eurozone’s
outlook for 2017. An improving labour market and a stronger
global economy are seen fuelling a healthy 1.6 per cent
expansion this year, up from the Consensus February forecast.
For 2018, growth is expected to be broadly steady at 1.5 per cent.
UNITED KINGDOM: The economy of the UK started the year on a
positive note and continues to confound the pessimists, with the
manufacturing sector expanding strongly in January. This came
on the back of revised GDP gures for Q4 2016 which showed
better growth than previously forecast. Exports also rose sharply,
likely due in part to a weaker pound sterling.
On the political front, the government’s Brexit Bill passed the
House of Commons intact, after an overwhelming majority of
MPs backed the bill and all amendments were defeated. At press
time it was being debated in the House of Lords. Consensus
forecasts 1.4 per cent growth this year, up 0.2 percentage
points from its February forecast. For 2018, growth in the UK is
projected to dip only very slightly.
JAPAN: USA President Donald J Trump’s anti-trade
policies threaten Japan’s nascent recovery as – despite an
unemployment rate at multi-year lows – timid gains in wage
growth continue to weigh on economic activity. Even so,
the Japanese economy managed to expand for the fourth
consecutive quarter in Q4 2016 as a weak yen and strong
global demand propelled export growth. But Japan is walking a
tightrope in terms of its economic recovery, with protectionism
shadowing its economic outlook. Consensus analysts in March
saw the Japanese economy growing one per cent this year,
unchanged from their February projection. For 2018, they see
growth at 0.8 per cent.
† Addressing the protectionist threat to the broad rebound
in global trade ows, Ms Bouzanis called attention to a
border adjustment tax (BAT) being hotly debated in the
USA, the world’s largest economy and the current epicentre
of protectionist sentiment. This measure, a favourite of
President Trump, would tax all imports into the USA, the
aim being to generate enough revenue to o set a large
corporate tax cut. The plan has been criticised by analysts
and would likely negatively impact key trading partners
such as China and Germany, which might take retaliatory
action. Mr Trump’s setback with the American Health Care
Act has clouded his prospects for achieving the BAT. But
his protectionist stance – along with his disregard for
international organisations such as the WTO (World Trade
Organization) – could, in the extreme scenario, spark a global
trade war.
Dorothy Fabian – USA Editor