Here's Why Citi Just Boosted Its 2012 Global Growth Forecast To 2.6%

Citi’s economics team just published its latest Global Economic Outlook and Strategy report.

The highlight of the massive 80-page publication was Citi boosted its forecast for global GDP growth to 2.6 per cent.  This is the third increase in three months (2.5% in March, 2.4% in February and 2.3% in January).

The revision was due to two reasons:

  1. Japan: “We are revising up our 2012 growth forecast again, this time driven mainly by domestic demand, and now expect 2.0% growth, versus 1.5% in the March forecast. Consumer spending continues to surprise to the upside thanks to newly- introduced subsidies for eco-car purchases and a modest improvement in labour market conditions. Reconstruction demand from the earthquake is also materialising gradually.”
  2. Euro Area: “With indications of a somewhat smaller decline in 1Q GDP, we have revised up our GDP forecast for 2012 from -1.2% to -1.0%, a third consecutive upward revision. However, with extra austerity measures in the pipeline and the continuing deleveraging in the private sector, we expect the euro area to stay in recession.”

Despite the upgrade, the economists continue to be relatively cautious.  Earlier this week, the IMF boosted its global growth outlook to 3.5 per cent.

Here’s a summary of Citi’s massive report:

chart

Photo: Citi Investment Research & Analysis

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