Economic Background: Growth and inflation

Key market summary: Cyclical inflation and growth assumptions in percent

Sector

Sector

Growth

Growth

Inflation

Inflation

3-Mo Libor

3-Mo Libor

Sector

United States

Growth

2.0

Inflation

2.0

3-Mo Libor

2.5

Sector

Eurozone

Growth

1.5

Inflation

1.8

3-Mo Libor

1.0

Sector

United Kingdom

Growth

1.6

Inflation

2.0

3-Mo Libor

2.5

Sector

Switzerland

Growth

1.7

Inflation

1.5

3-Mo Libor

0.9

Sector

Japan

Growth

0.5

Inflation

0.3

3-Mo Libor

0.9

Sector

China

Growth

5.8

Inflation

2.8

3-Mo Libor

3.3

Sector

Global Markets

Growth

2.8

Inflation

2.3

3-Mo Libor

N/A

Sector

Developed Markets

Growth

1.7

Inflation

1.8

3-Mo Libor

N/A

Sector

Emerging Markets

Growth

4.6

Inflation

3.2

3-Mo Libor

N/A

Over the next five years (2019-2024), we expect average annual global growth of 2.8%, slightly lower than the 2.9% average annual growth from 2014-2018.We expect inflation to average 2.3% across the globe. We believe this will allow the gradual normalization of monetary policy. We do not expect real rates to rise to their peaks of the 1980s or early 1990s, but we do expect several of them to finally become positive or only very slightly negative.

Real growth on average should be slightly lower than in the previous decade. This should translate to real earnings growth in the 2.8% range globally, with some markets having higher growth (emerging markets) and others having lower growth (Japan).

In general, the Anglosphere countries—United States, UK, Canada and Australia—should have inflation at or around 2.0%. In continental Europe and Japan, we expect lower inflation: around 1.8% for the eurozone, 1.6% for Switzerland, and 0.3% for Japan.

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