WESTPAC: 'It's hard to get excited about a near term recovery' in global growth

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Global economic growth, compared to 2015, is tipped to accelerate in 2016, continuing the pattern seen every year since the global financial crisis.

However, as has also been the case in recent years, perhaps those expectations are already looking optimistic, at least when looking at the chart below.

From Robert Rennie of Westpac, it tracks global industrial production growth against the OECD global leading index, a gauge designed to anticipate turning points in economic activity relative to trend according to a statement on the OECD’s website.

The OECD leading index is at the lowest level since October 2012 while global industrial production is at lows back to March 2013.

Coupled with recent volatility in financial markets, along with softening air freight conditions, Rennie suggests “it’s hard to get too excited about a near term pickup in global growth”.

While it’s only one indicator, if there’s one thing that markets have become accustomed to in the post financial crisis era, it’s the near constant downward revisions to global economic growth forecasts from analysts.

Over-promising only to underwhelm is now increasingly the rule rather than the exception for markets.

Based on early evidence, that trend may yet be maintained in the year ahead.

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