Global economy to continue to expand - Nomura

Analysts at Nomura suggest that in their view, the economic slowdown seen since the beginning of this year is a temporary adjustment triggered partly by a slowdown in smartphone sales, and they expect the global economy to continue to expand albeit while following a longer-term slowdown trend.

Key Quotes

“Key risks we would mention include (1) the cyclical recovery in capex in the US and Europe might run out of steam sooner than expected. (2) a sharp rise in inflation in the US, where the government is carrying out a massive fiscal expansion program while the economy is at more or less full employment, and (3) a sharp rise in crude oil prices as a result of heightened geopolitical risk.”

“Trade war

Concerns on the financial markets about trade friction between the US and China began to mount towards the end of March and reached a peak at the beginning of April, since when they have eased. However, renewed tension has emerged between the US and China, with the US imposing a new ban on transactions with a Chinese telecommunications equipment major, for example. We will be interested to see how much progress is made in the talks between high-level representatives of the US and Chinese governments scheduled for early May. Meanwhile, the focus of the new US-Japan trade talks is likely to be on agriculture and autos, as before, as well as on a free trade agreement.”

“Economic stimulus measures and the political situation in Japan

A switch to a more hawkish Japanese economic policy following a change in prime minister is a risk scenario for our economic forecasts, but in reality we see little likelihood of a sudden shift to a more hawkish stance. In terms of the content of future Japanese economic policy, we will be looking out for public spending aimed at maintaining and upgrading public infrastructure, which it is relatively easy to increase without being criticized for engaging in pork barrel politics.”