The Economic Outlook for 2015

The annual economic outlook for 2015 has been released by Invesco, revealing that faster growth of the quantity of money is desperately needed to avoid deflation.

Despite a more positive economic outlook in 2014 we’re still hearing warning signs about the state of the global economy from all directions. Figures from Eurostat, the statistical office of the European Union, have shown that the Eurozone experienced deflation of 0.2 per cent in December compared to the same month last year and the economic bloc remains in a troubled state.

Invesco’s Chief Economist John Greenwood discusses in his outlook for global economies that Eurozone growth will continue to “bump along the bottom” with no indicators of a genuine upturn, which is worrying sign for the wider global economy. The Eurozone has only seen balance sheet repair in the periphery (notably Spain and Ireland) but these improvements are outweighed by the lack of deleveraging in France and Italy.

The Euro has already taken a hit this year and is likely to continue to navigate troubled waters until the European Central Bank takes action, possibly buying up sovereign debt. The Japanese yen is also likely to weaken further while the British pound is likely to weaken against the US dollar but strengthen modestly against the euro. Based on the assumption that US Federal Reserve (Fed) will raise short-term interest rates ahead of other central banks in the second half of 2015, the dollar is likely to remain strong throughout the year.

In terms of monetary policy the report finds that there is likely to be a marked divergence in the monetary stance of the US and the UK against Japan and the Eurozone. The Federal Reserve and the Bank of England are both likely to raise interest rates from the second half of 2015, but the European Central Bank (ECB) and the Bank of Japan are expected to continue with asset purchases and zero interest rates.

Growth in emerging economies is being held up by slow recoveries in the US and the Eurozone. Estimates of China’s growth continue to fall as exports disappoint and capital investment slows, which has been compounded by the fact that the authorities are reluctant to ease monetary policy. Elsewhere, Brazil, India and Russia have all witnessed a slowdown in growth, much of which is tied to a sluggish global economy.

Here’s the world economy in brief as according to the Investec report.

The United States

An economy that is “gradually returning to usual” although with the possibility of “volatile financial market conditions in the months ahead”.

The Eurozone

The large economies of France and Italy have “failed to show any de-leveraging in either the private or public sector”.

United Kingdom

Investment spending by businesses demonstrates the upswing is “more than simply a consumption-led recovery”.


The decline in consumer spending could last “for a prolonged period”.

China and non-Japan Asia

The economic slowdown in China has not been contained to specific sectors, “it is becoming generalised”.

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