Winter slump in the US and slowdown in ChinaWinter slump in the US and slowdown in ChinaWinter slump in the US and slowdown in ChinaWinter slump in the US and slowdown in ChinaWinter slump in the US and slowdown in ChinaWinter slump in the US and slowdown in ChinaWinter slump in the US and slowdown in ChinaWinter slump in the US and slowdown in ChinaWinter slump in the US and slowdown in China

The acceleration in growth will be gradual in 2015 according to the International Monetary Fund (IMF). The institution expects the world economy to grow by 3.5% in 2015 and by 3.8% in 2016, in both cases in line with January's forecast and above the figure 3.4% from 2014. This gradual acceleration will largely be supported by an improvement in the advanced economies. However, the emerging economies will see their fifth consecutive year of deceleration, affected by falling oil prices, geopolitical tensions and especially the slowdown in the Chinese economy whose relative share represents 30% of the emerging bloc in purchasing power parity. Nevertheless the IMF expects these economies to gain traction in 2016 thanks to a more balanced macroeconomic situation (inflation, fiscal and external balance) and the stabilisation in geopolitical tensions. Regarding January's forecast, worthy of note is the downward revision of the United States (3.1% in 2015) although it is still the fastest growing rich economy, and also the upward revision of the forecasts for the euro area (1.5%) and Japan (1.0%). Among the emerging economies, the largest deterioration can be found in Brazil (–1.0%) and Russia (–3.8%). Within this scenario of slow global acceleration the IMF states that downside risks have diminished compared with its previous report although they are still considerable.


GDP grew by a subdued 0.1% quarter-on-quarter in 2015 Q1 (3.0% year-on-year), clearly less than in the last few quarters. By demand component, worthy of note is the drop in investment which slumped due to the sharp fall in structural investment and the negative contribution made by the foreign sector after a sharp fall in exports. On the other hand private consumption and stocks contributed positively to GDP growth. This moderate advance is the result of a harsher winter than usual although disruptions in activity because of strikes at ports on the west coast and the dollar's strength have also reduced the figures. Nonetheless, as most of the factors resulting in Q1's weaker growth are temporary, we have maintained our growth forecast at 3.1% for 2015 (we had lowered it last month) and 2.8% in 2016.

We expect to see the US economy speed up considerably in 2015 Q2, allowing it to continue leading the recovery among the advanced economies. Having got over the winter hiatus, private consumption should now accelerate supported by the improved labour market and the rise in the savings rate over the last few months. Almost all the reduction in expenditure on petrol (due to falling crude prices) has been allocated to savings: the household savings rate went from 4.4% of gross disposable income in November to 5.8% in February, an upswing that leaves plenty of room for a recovery in private consumption over the coming months. We also expect construction to gain traction in Q2. Adverse weather conditions meant that the number of new homes started in February and March dropped compared with December 2014, by 15.3% and 13.6% respectively. However, the trend in second-hand house prices, up by 5.1% in March, and the formation of new households continue to point to a clear recovery in the sector.

The latest business indicators confirm the strength of the US economy. The ISM business sentiment indices remain in the expansionary zone although there is a marked difference between manufacturing and services. The ISM index for manufacturing has continued its downward slide, posting a further decrease from 52.0 points in February to 51.5 points in March. Industrial production, which in the first three months of 2015 fell by 1% when it had risen by 4.6% in 2014, also suggests that manufacturing is weak. But while industry is declining services, which contribute 83.6% of all private employment, are performing well and the ISM services index held steady at 56.5 points (a decrease ompared with 56.9 in February). February's retail sales (excluding automobiles, which are more volatile in nature) did not vary compared with January and the Consumer Board confidence index stood at 95.2 points in April, above its historical average of 93.4 points.

The dynamic labour market suffers a temporary halt. In March 126,000 net jobs were created, half the average for
the last 12 months, namely 260,000. However, this latest figure should not mar the good performance by the labour market in general. The number of employees grew at a rate of 2.3% year-on-year, the fastest since 2000, and March's unemployment rate remained at a low 5.5% of the labour force. The broad unemployment rate (known as the U6 and including employees working part-time for financial reasons who would like to work full-time) fell by 0.1 pps to 10.9%, a clearly lower figure than the 12.2% of July 2014. The biggest weakness in the US labour market is still the low participation rate which stood at 62.7% in March, far from the 66.0% recorded in 2007.

Inflation is still moderate. March's CPI rose by 0.2% compared with February although it has accumulated a year-on-year decrease of 0.1% due to prices falling over the last few months. Core inflation, which excludes prices for food and energy products, also rose by 0.2% month-on-month in March, 1.8% cumulative year-on-year, but would remain at a more subdued 0.9% year-on-year if the effect of owners' equivalent rent were not taken into account. Given this situation of low inflationary risk, we continue to expect the Fed will wait until autumn to raise the official interest rate.


The Japanese economy will pick up in 2015 supported by monetary and fiscal stimuli, wage improvements, cheap oil and a somewhat more favourable international environment. Nonetheless this process will be slow. Private consumption is still suffering from the effects of the VAT hike in April 2014 (from 5% to 8%) while industrial production fell in February by 3.1% month-on-month and the Tankan business sentiment index for 2015 Q1, produced by the Bank of Japan (BoJ), remained almost at a standstill. The positive figures come from the foreign sector which, thanks to a weak yen and cheap oil, presented its first surplus in March since the Fukushima tragedy in February 2011. We have therefore kept our growth forecast at 0.8% for 2015 and at 1.2% for 2016.

Inflation is still low. The general CPI in February grew by 2.2% year-on-year but only by 0.1% without the effect of the VAT hike. Similarly the CPI without food (but with energy), the BoJ benchmark, grew by 2.0% year-on-year, leading to an effective year-on-year increase of 0.0%, discounting the VAT effect. This figure is very far from the 2% target of the BoJ, which is continuing its quantitative easing with annual purchases, mainly of public debt, totalling 80 trillion yen (16% of GDP).


In 2015 Q1 China's GDP grew by 7.0% year-on-year, its lowest rate for the last six years. This confirms the downside risks we pointed out several weeks ago and has forced us to lower our growth forecasts for 2015 (from 7.0% to 6.7%) and for 2016 (from 6.6% to 6.5%). This slowdown was greater in the secondary sector, which grew by 6.4% year-on-year in Q1, clearly below 2014's average of 7.4%. March's industrial production figures, up by 5.6% (the average in 2014 was 8.3%), confirm the slowdown in industry and the far-reaching change the Chinese economy should undergo, shifting towards growth based much more on services. In fact the tertiary sector advanced by 7.9% year-on-year in Q1, in line with the figures for 2014. On the other hand the stability of inflation, up by 1.4% year-on-year in March, leaves room for expansionary policies. In this respect, and given the confirmation of the country's economic slowdown, the government took action by reducing the cash reserve ratio by 1.0 pps.

Brazil is the emerging country with the greatest risks. Worsening business indicators and its poor budgetary trend (entailing greater fiscal adjustment if the deficit targets are to be met) are in addition to rising inflation due to the liberalisation of electricity prices and the depreciation of the Brazilian real. All this has justified a downward revision of our forecasts: from –0.1% to –0.9% in 2015 and from 1.5% to 0.8% in 2016 (see the Focus «The deterioration in Brazil's outlook: a bad patch or something more deep-rooted?»).

Continued instability in Russia and good performance by India. While there are signs of incipient financial stabilisation in Russia this is still precarious and easily reversible. In India a somewhat more expansionary budget in 2015 and stress on investment have led us to revise upwards our forecast for 2015 from 6.9% to 7.1%.