Labour market improvement and above-trend growth in the major developed economies in 2016 – Goldman Sachs

By FXStreet FXStreet (Delhi) – Research Team at Goldman Sachs, suggests that despite the recent market turmoil, their central global economic outlook has not changed materially.

Key Quotes

“We expect modestly above-trend growth and further labor market improvement in the major developed economies, gradual Fed rate hikes, and ongoing “bumpy deceleration” in China. Today we consider some of the key risks to this view.

Simulations using our global economic model suggest that the spillovers from recent events in China should be manageable. Even under more adverse scenarios featuring a significantly bigger-than-expected slowdown in Chinese domestic demand, sizable CNY depreciation, and further tightening in domestic Chinese financial conditions, our estimated GDP effects in the US, Europe, and Japan are mostly in the 0.2-0.3pp range.

The commodity price plunge is a problem for the oil exporters, but it is either neutral or positive for most advanced economies. In the United States, the growth impact is probably around zero as the—admittedly sizable—negative effects on the energy-producing sector are roughly offset by the positive effects on the consumer.

The tightening of financial conditions since 2014 has been weighing on US growth, but our analysis of the “FCI impulse” suggests that the impact should be no larger in 2016 than in …read more

Source:: FX Street