The International Monetary Fund (IMF) raised its 2017 global growth forecast citing improved manufacturing and trade gains in Europe, Japan and China. At the same time, the Fund cautioned that protectionism threatens a broad-based recovery.

World economic growth is set to expand by 3.5 per cent in 2017. This marks an increase from the 3.4 per cent growth that the Fund projected in January. The IMF anticipates that chronically weak advanced economies will benefit from a cyclical recovery in global manufacturing and trade that started to gain momentum last summer. The IMF raised Japan’s 2017 growth projection by 0.4 per cent to 1.2 per cent. Meanwhile, China and the eurozone saw their growth projections rise by 0.1 per cent each to 1.7 per cent and 6.6 per cent respectively.

In the meantime, figures published last week by the European Commission showed that consumer confidence in the currency union strengthened significantly by 1.4 points to -3.6 in April from a final March reading of -5.0. The reading was better than the consensus estimates of -4.8.

In the EU as a whole, the corresponding indicator rose by 0.8 point to -3.4 in March. Following a minimal decline in confidence in February, the index was at its highest since the financial crisis. Improved consumer confidence indicates that wage growth may also have improved. European Central Bank chief economist Peter Praet said “the economic recovery is gaining momentum” and “there may be some upside risk in the very short term”.

Finally in the US, the Federal Reserve’s Beige Book said that the US economy continued to grow in all 12 Fed districts. The report said the rate of growth was equally divided between modest and moderate economic growth in the past few months. “In addition, the pickup was evident to varying degrees across economic sectors”. Modest wage pressures increased during the most recent review period.

On the labour market, “a larger number of firms mentioned high turnover rates and more difficulty in retaining workers”. The Beige Book also reported that inflation was modest, with selling prices climbing “only slightly”. These marginal increases support recent inflation data.

This report was compiled by Bank of Valletta for general information purposes only.

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