Headwinds to the global economic recovery

The world economy has remained subpar in 2015 but are recent concerns about the fragility of global demand and price stability justified? 

19th October 2015

Continue to the other two articles in this edition of the Global Outlook....

US housing - recovery revisited

After a sustained period of strong job creation, an uptick in household formation, and the return of very low interest rates, US housing appears to be making a comeback once again.  Eileen Marrinan, Director of Research, Grosvenor Americas investigates in more detail.  Click here to read more.

What are the recent trends in global real estate investment?

Global commercial real estate volumes were up 17% in the first half of 2015 and cross-border flows have also been on the rise. Which investors have been active and in which locations and sectors?
In this month’s ‘Questions & Answers’, Simon Chinn, Research Analyst, Grosvenor Group, offers his insight.   Click here to read more.

The world economy has remained subpar in 2015.  Underwhelming economic performance has been exacerbated in recent months by successive bouts of financial market turbulence, which have exposed concerns about the fragility of global demand and price stability.

Nonetheless, while there are still a number of significant downside risks, the underlying drivers for a modest acceleration in economic activity — easy financial conditions, reduced fiscal austerity, lower fuel prices, stronger labour markets and improving trend confidence — remain intact.  As such, we continue to expect growth to strengthen further in the year ahead, with world growth averaging 3.1% p.a. in 2016, in line with its long-term potential growth rate.

The recovery in the US and UK economies remains the key bright spot in the world economy. The overall picture is of economies operating near full employment and growing robustly. This is feeding into rising real wages and stronger consumer spending on either side of the Atlantic, although both indicators remain marginally weaker than expected. And while the Fed held off from raising interest rates in September, Fed officials have since reiterated that they believe the US economy is generally healthy.  We see a 2015 US rate rise as the most probable scenario, with the UK to follow in early 2016.

Elsewhere, the economic recovery is proceeding, but at a slower pace. A modest recovery in the Eurozone remains on track, with both domestic demand and core inflation stabilising in recent months. While the overall pace of growth remains subdued (real GDP rose by 1.5% y-o-y in Q2), there are a number of supporting factors underpinning demand in the Eurozone. We continue to expect the Eurozone to achieve real GDP growth of 1.5% in 2015 and 1.7% in 2016.

The Japanese recovery has looked less assured in recent months, with full-year growth forecasts revised lower to just 0.6% in 2015 (from 1.0% previously). In response, the Bank of Japan is continuing to expand its QE program and the government is pressing forward with a second round of structural reforms in hopes of reviving growth and inflation. But the biggest uncertainty in Asia remains the Chinese economy. Despite the raft of stimulus measures policy makers have unveiled in the last two months, China will likely continue to struggle to revive growth. Overall, China’s economy now looks to be moderating faster than expected toward a more sustainable long-term growth rate of around 6.0-6.5% p.a.

In addition to China, a number of other emerging markets are also struggling to maintain growth. Worryingly a key engine of emerging market growth, global trade, has plummeted; advanced economy trade growth has outpaced emerging market trade growth in 2015, the first time since the 1997 Asian financial crisis (see Chart). As a result, emerging markets have seen a cumulative net outflow of more than $1 trillion over the past year as investors have again retreated to safe-haven markets.

 

View all Grosvenor contacts

Grosvenor Europe Disclaimer

Use of this Grosvenor Europe section of the grosvenor.com website (the “Grosvenor Europe Website”) is subject to the following terms and legal notices (“Conditions”).  You are being asked to agree to these Conditions because:  (a) you are accessing the Grosvenor Europe Website for the first time or (b) you are accessing the Grosvenor Europe Website from a different section of the grosvenor.com website.

The information in the Grosvenor Europe Website was prepared by Grosvenor Europe only for, and is directed only at, the limited categories of persons described under “LEGAL NOTICES” below.  The information in this Grosvenor Europe Website is not intended for the use of and should not be relied on by any other person.

Grosvenor Europe Limited is registered in England, with Company Number 04056191 and its registered office at 70 Grosvenor Street, London W1K 3JP.
This Grosvenor Europe Website contains general information about Grosvenor Europe and related entities and is intended for informational purposes only. The information contained on this Grosvenor Europe Website is not an offer to sell or a solicitation of an offer to purchase interests in any fund managed by Grosvenor Europe or a related entity, nor  is it intended to provide, and should not be relied on for, investment, tax, legal or financial advice.  Investors should seek applicable professional advice for their particular situation.  The information contained herein is a summary only, is not complete, and does not include certain material information, including potential conflicts of interest and risks associated with an investment with Grosvenor Europe and its related entities.

No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information or opinions contained in the enclosed materials, including hyperlinks or references to other sites, by Grosvenor Europe or its related entities, and no liability is accepted by such persons for the accuracy or completeness of any such information or opinions, to the fullest extent permissible by applicable law.  Users are responsible for evaluating the adequacy, accuracy, reliability, merchantability, non-infringement, and/or completeness of any information or the content available on this Grosvenor Europe Website or fitness for any particular purpose with respect to this Grosvenor Europe Website or any of its content.  The estimates, strategies, and views expressed herein are based upon past or current market conditions and/or data and information provided by unaffiliated third parties (which has not been independently verified) and is subject to change without notice. An investment with Grosvenor Europe is speculative and contains significant risks, including the risk of loss of some or all of an investment, and is intended only for sophisticated investors who meet certain eligibility criteria.  Such investments are not deposits or obligations of, or guaranteed or endorsed by, any bank and are not insured or guaranteed by any government or any other agency.

LEGAL NOTICES

Information displayed on this Grosvenor Europe Website may contain material that is interpreted as a financial promotion for purposes of the Financial Services and Markets Act 2000 of the United Kingdom (the “FSMA”).  Grosvenor Europe is not an authorised person for purposes of the FSMA, and accordingly, the communication of information on this Grosvenor Europe Website is provided only for and is directed only at persons in the UK reasonably believed to be of a kind to whom such promotions may be communicated by an unauthorised person pursuant to an exemption under the FSMA (Financial Promotion) Order 2005 (the “FPO”).  Such persons include: (a) persons having professional experience in matters relating to investments (“Investment Professionals”) and (b) high net worth bodies corporate, partnerships, unincorporated associations, trusts, etc. falling within Article 49 of the FPO (“High Net Worth Businesses”). High Net Worth Businesses include: (i) a corporation which has called-up share capital or net assets of at least £5 million or is a member of a group in which includes a company with called-up share capital or net assets of at least £5 million (but where the corporation has more than 20 shareholders or it is a subsidiary of a company with more than 20 shareholders, the £5 million share capital / net assets requirement is reduced to £500,000); (ii) a partnership or unincorporated association with net assets of at least £5 million and (iii) a trustee of a trust which has had gross assets (i.e. total assets held before deduction of any liabilities) of at least £10 million at any time within the year preceding the promotion.  Any investment opportunities mentioned in this Grosvenor Europe Website are available only to such persons, and persons of any other description in the UK may not rely on the information in it.  Most of the protections provided by the UK regulatory system, and compensation under the UK Financial Services Compensation Scheme, will not be available.

Grosvenor Europe is established in the United Kingdom, which is a member state of the European Economic Area (the “EEA”).  Accordingly, this Grosvenor Europe Website is issued by Grosvenor Europe to the categories of persons described in the paragraph above that are both resident in and accessing this Grosvenor Europe Website from any member state of the EEA in reliance on its rights under the Directive on Electronic Commerce (2000/31/EC).  The member states of the EEA are:  Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden and the United Kingdom.

If you are not resident in an EEA member state or you are viewing this Grosvenor Europe Website in a country that is not an EEA member state, information displayed on this Grosvenor Europe Website contains material that may be interpreted by the relevant authorities in the country from which you are viewing the Grosvenor Europe Website as a financial promotion or an offer to purchase securities. Accordingly, the information on this Grosvenor Europe Website is only intended to be viewed by persons who fall outside the scope of any law that seeks to regulate financial promotions in your country of residence or in the country in which the Grosvenor Europe Website is being viewed. Examples of such persons may be governmental agencies, persons sufficiently experienced in investment business to appreciate the risks associated with investment services promoted on this Grosvenor Europe Website, large corporations and trusts and high net worth individuals. These examples are not country specific, may not be relevant to the country in which the Grosvenor Europe Website is being viewed and are provided for illustration purposes only. If you are uncertain about your position under the laws of your country of residence or the country in which the Grosvenor Europe Website is being viewed then you should consult your legal adviser.

Notice to Persons in the United States:

With respect to U.S. investors, investments in funds managed by Grosvenor Europe or a related entity are restricted to institutional investors who meet certain eligibility requirements.  Any potential investor should satisfy him or herself that an investment in any product of Grosvenor Europe or a related entity is permissible under the rules and regulations of his or her domicile.  This Grosvenor Europe Website is not directed to any person in any jurisdiction where the publication or availability of this Grosvenor Europe Website is or would be prohibited.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. YOU SHOULD CONSULT WITH YOUR LEGAL, TAX, FINANCIAL, AND OTHER ADVISORS PRIOR TO MAKING AN INVESTMENT WITH GROSVENOR.

The related entities of Grosvenor Europe include Grosvenor Investment Management Limited, which is registered in England (Company Number 02774291) with its registered office at 70 Grosvenor Street, London W1K 3JP and which is authorised and regulated by the Financial Conduct Authority.

By ACCEPTING this disclaimer, you consent to the above Conditions and, in particular, you confirm that either:

(a)     you are resident in and accessing this Grosvenor Europe Website from one of the United Kingdom or another member state of the EEA and you qualify as an exempt category of person under the FPO (such as an Investment Professional or High Net Worth Business, as described under “LEGAL NOTICES” above); or

(b)     you fall outside the scope of any law that seeks to regulate financial promotions both in the country of your residence and in the country in which you are viewing this Grosvenor Europe Website, and therefore by accessing this Grosvenor Europe Website you will not contravene or cause Grosvenor to contravene any such law.