EuroWire May 2017

Transatlantic cable

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

† 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

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May 2017