Whether a glass is half full or half empty depends on who is looking at it and from which angle. On the economic front, recent data and the near-term outlook argue in favour of "half full".
BNP Paribas Group Chief Economist William De Vijlder discusses the latest market drivers.
Growth is resilient in the developed economies and recent releases for the Eurozone have surprised on the upside. Even Japan is looking better. The developing economies have shown some improvement, although the picture is very heterogeneous. The growth slowdown in China has been halted temporarily, in India growth is expected to increase slightly and the outlook for Brazil and Russia has improved with the prospect of leaving the recession behind.
Yet international organisations make a "half empty" assessment. The BIS is concerned about financial market dissonance, the OECD has issued a global growth warning, and last week's World Economic Outlook from the IMF emphasises a "subdued outlook subject to sizeable uncertainty and downside risks." Much of this has to do with "looking at the glass" from a different angle, i.e., with a longer term perspective: the slowdown in potential GDP growth and global trade, the too-high rate of unemployment, particularly among the youth, the reduced effectiveness of monetary policy, and high levels of public sector debt that limit policy leeway.
In addition, political uncertainties (Brexit, elections) have increased. With the risks and uncertainties having been well identified, it is now up to economic policy to take them on board. For monetary policy, this implies the ECB keeping its hand on the throttle and the Fed touching the brakes, but very gently.