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August 08, 2017

Global Economy: Momentum remains weak

  • The US economy added 22,000 non-farm jobs in June, exceeding expectations signaling revival of labor demand in the United States (US)
  • Growth slows in the United Kingdom (UK) as its services sector records the slowest on-quarter growth since Q1 2015 led by decline in retail sales and housing sales
  • China's services sector continued to grow at a robust pace in June as indicated by the non-manufacturing Purchasing Managers' Index which stood at 54.9%
  • Crude oil prices plunged to a seven-month low of $46.4 per barrel in June as production increased in the US, Libya, and Nigeria

The green shoots of global recovery are becoming healthier, but the pace of growth is not evenly distributed. While the on-quarter growth in the US, UK and Japan was slower in the first quarter (Q1) of 2017, the Euro area and China showed resilience. Two major events in June helped temper the fear of protectionism and raised expectations of stronger growth in the Euro area. First, was the victory of French President Macron's pro-Europe party, En March, in the French Parliamentary elections and second was the failure of the pro-Brexit Conservative Party – led by UK Prime Minister May – to win a majority in the parliamentary elections. In its Global Economic Prospects report (June 2017), the World Bank forecast global growth will strengthen to 2.7% in 2017 from 2.4% in 2016 and gather increased momentum to 2.9% during 2018 and 2019. While advanced economies are projected to grow at 1.9% in 2017 (from 1.7% in 2016), emerging markets and developing economies are likely to recover to 1.4% (from 2.5% in 2016).