Modest rebound of global economy appears intact, says Barclays

The global economic recovery continues to be synchronized. The U.S. economic growth came in weak in the first quarter of this year, whereas the recent April manufacturing PMIs of China indicate reduced momentum and that the recent weakness in commodity prices raises questions regarding global demand. However, the reasons for weak growth in U.S., which was mainly because of consumption, are mostly temporary, and the growth is expected to pick up in the second quarter, noted Barclays in a research report.

This week’s strong labor market data indicates that private consumption in the U.S. should continue to be healthy. Meanwhile, the signals of Chinese economy’s slowdown come on the back of stronger than expected growth in the first quarter and indicate moderation rather than any serious disruption. Similarly, the recent oil price declines are likely to be just temporary, mainly driven by inventory adjustments and supply factors rather than reflecting weak demand, added Barclays.

Significantly, the first quarter economic growth data of Europe has been strong, easing concerns regarding the ‘hard’ versus ‘soft’ data gap; and the still elevated April PMIs imply momentum stays strong. Similarly, the Japanese economy continues to expand above potential driven by strong net exports.

The general rebound in export activity also augurs well for the wider emerging market universe. The EM manufacturing PMIs, excluding China, hint at a further upward trend. Therefore, while regions are seeing different momentum and political risks loom, the overall modest rebound of the global economy, including nominal GDP growth, appears intact, stated Barclays.