Global Economy Likely to Remain Stalled in 2016

The outlook for the global economy in 2016 is a mixed bag, with positive news for the U.S. economy and choppy forecasts for other parts of the world. Economists at IHS Global Insight continue to forecast 3.0 percent global real GDP growth in 2016. That growth, however, will not be felt across the global board as downward revisions to the forecasts for Brazil, Canada, Japan, Russia, and the United Kingdom are offset by an upward revision to U.S. growth.

“We expect some of the demand-side constraints on growth (deleveraging and austerity, weak trade growth, and the slowdown in China) to ease in the coming year,” says IHS Chief Economist Nariman Behravesh. “Yet, the longer-term deceleration in the global economy will not reverse without aggressive policy actions to alleviate supply constraints.”

As for the United States, Behravesh says “the economy keeps chugging along,” while the Federal Reserve holds fire. Second-quarter real GDP growth was revised up from 3.7 percent to 3.9 percent owing to more robust growth in domestic demand, including consumer spending, capital expenditures, and residential investment. The need to work down elevated levels of inventories will restrain near-term growth.

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