Global economy improving despite uncertainty

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The global economy has been growing, in spite of economic uncertainty, says the latest Scotiabank Economics Global Outlook.


Macroeconomic data suggests there has been improvement in household and business confidence, while job growth is high. There is more investment activity in many countries, and there is improvement in the manufacturing sector, especially in the U.S. and Canada, says the Outlook published April 6.


This growth in the economy could outweigh risks from U.S. policy. "It now appears that the Trump administration is less likely to move forward with extreme protectionist policies as well as the destination-based cash flow tax, including the border tax adjustment," says Jean-François Perrault, Senior Vice President and Chief Economist at Scotiabank. "Of course, these risks remain and others still weigh on the outlook. Because of this, we maintain that political and geo-political factors remain the dominant economic risks."


Uncertainty regarding U.S. policy


In Canada, Scotiabank forecasts accelerating growth, primarily due to the housing market and auto industries, but investment is being inhibited due to uncertainty about U.S. policy. The United States will see continuing accelerating growth as well, with an improvement in the labor market, consumer demand and increasing investments. “But policy missteps by the U.S. authorities could represent the greatest threat to continuation of U.S. recovery,” says the Outlook report.


As for currency, the USD is expected to regain strength through the next quarter.


In Mexico, the economic growth outlook is weakening due to risks regarding potential changes to U.S. trade policy. Also, the Banco de Mexico has had to increase interest rates due to increasing inflation from rising fuel prices.


Brexit could threaten U.K. growth


Brexit will most likely not have “major new consequences” on the U.K.’s outlook, but the economy could be negatively impacted as negotiating positions become clearer.


Latin America’s economy is expected to be impacted by adverse weather, as well as elections in countries in the core economies.


As published in The Insurance & Investment Journal by Natasha Tremblay April 10, 2017 11:30 a.m.         


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