Global Recession?

If one were to ‘arrive from Mars’ and consider a global economy in which world trade prices were deflating, savings rates were rising, investment rates were falling while government fiscal positions were stable or improving, and monetary conditions were tightening as the tide of global capital flows ebbed away, one would expect to find evidence of a softening global economy and a rising risk of recession. We would therefore argue that markets should not therefore be surprised that symptoms of a sharp global slowdown abound.

Consequently, it seems to us that far from marking a year of accelerating global growth and inflation, 2015 looks set to remain perhaps the most disappointing year for growth trends since the GFC and to retain a bias towards deflation, although we continue to suspect that even this will not stay the FRB’s hand when it comes to raising rates in an effort to escape the zero rate trap in the near term.