Are global growth fears over-stated?

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“Some of these global growth indicators moreover suggest that global growth will actually strengthen, albeit modestly, in the period immediately ahead. Recent market jitters moreover could simply reflect a realignment of inflated expectations of what the world economy might have been capable of generating as some (though not all) of the economic data has disappointed,” analysts at UBS commented.

The main problem, the one we should be really worrying about is the inflation-disinflation-deflation trio.

“We think the degree to which European inflation expectations have become unhinged to the downside is now somewhat alarming. Recent sharp declines in food and energy prices suggest further downside for headline inflation outcomes in the period ahead that could further weigh on those inflation expectations. Excess capacity in most of the world’s large economies, including China, and the unique issues that bedevil the latter, could further undermine globally traded goods prices in the period ahead. Structural issues in the meantime concerning ageing demographics and new technologies are posing additional challenges for some of the normal cyclical mechanisms that might spur global inflation,” they write.

Notwithstanding, low inflation is not the main problem of the eurozone’s economy. See why.

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