The International Monetary Fund (IMF) last week upped its forecast for world economic growth to 3.9 per cent for both 2018 and 2019, from the 3.7 per cent it projected in its October update. The Fund sees the current improvement to be broad-based.

The report says that 120 economies, accounting for three-quarters of global economic activity, saw a pick-up last year. Both developed and emerging economies were affected, leading to what the IMF called the broadest synchronised global growth upsurge since 2010.

The Fund also expects the tax reforms agreed in the US last year to stimulate the country’s economy. However, IMF chief economist Maurice Obstfeld warned that “the present economic momentum reflects a confluence of factors that is unlikely to last for long”.

Meanwhile, flash data from IHS Markit showed that the eurozone private sector activity in January expanded at the fastest rate in nearly 12 years.

The composite purchasing manager’s index (PMI) rose unexpectedly to 58.6 in January from 58.1 the previous month. Economists expected the gauge to decline to 57.9. The January reading was the highest since June 2006. A dip in manufacturing numbers, as a result of a drop in both Germany and France, was more than compensated by the services measure.

January’s jump in output strengthen the case for the European Central Bank to revisit its forward guidance early this year.

Finally, in the United States, the National Association of Realtors reported that US home sales fell more than expected in December as the supply of houses on the market dropped to a record low, pushing up prices and discouraging first-time buyers. The decline in home sales followed three consecutive months of strong increases. Inventory constraints was a limiting factor for the housing market last year against the backdrop of robust demand, largely driven by a labour market that is near full employment. Economists expect supply to remain tight this year, which, together with rising mortgage rates, could result in modest home sales growth.

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