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August 24, 2017

Global Economy: Riding up the cyclical rebound

  • Inflation continued to decline for the fourth consecutive month in United States (US), printing at 1.6% in June
  • Robust domestic demand pushes Japan's second quarter (Q2) 2017 growth up to a solid 4%
  • China racked up a better-than-expect growth rate of 6.9% in Q2 2017, backed by its strengthening services sector
  • Global metals prices rose in July as iron-ore prices shot up

In the July, the International Monetary Fund (IMF) confirmed that global recovery is on a firmer footing. It projected global growth to pick up from 3.2% in 2016 to 3.5% in 2017 and3.6% in 2018, unchanged from its April outlook. However, it has revised its country-level growth forecast in the July update. It has revised down its growth forecast for the US by 20basis points (bps) to 2.1% in 2017 and by 40 bps to 2.1% in 2018 citing a less expansionary fiscal policy than previously assumed. The growth forecast has also been revised down for the United Kingdom (UK) by 30 bps to 1.7% in 2017 (forecast for 2018 remains unchanged at 1.5%) on weaker-than-expected economic activity in the first quarter (Q1)of 2017. In contrast, growth projections for the euro area have been revised up by 20 bps to1.9% in 2017 and by 10 bps to 1.7% in 2018 on account of strong economic activity in Q12017 and diminished political risk. The growth forecast was also revised up for Japan by10 bps to 1.3% in 2017 (forecast for 2018 remains unchanged at 0.6%) on account of positive cues from private consumption, investment, and exports, which supported Q1growth. China’s growth forecast to has been revised up by 10 bps to 6.7% in 2017 and 20bps to 6.4% in 2018, on the strong growth posted thus far and expectations of continued fiscal support.