Economic growth prospects are flagging across Europe, Japan and big emerging markets such as India, a turn that presents fresh challenges to other relatively robust economies.
Data released last Friday points to slackening economic vitality worldwide. In Europe, consumer prices rose in November at their slowest annual pace in five years, deepening fears the continent may be tipping toward deflation. In Japan, the core consumer-price index in October rose at its slowest pace this year. In both places the fall in energy prices has pushed central banks to boost the inflation rate and stoke consumer and business confidence.
The picture in emerging markets isn’t much brighter. Economic growth in India decelerated in the third quarter, according to government data released by the end of November. Figures in Brazil showed Latin America’s biggest economy had edged out of recession in the third quarter of 2014, helped by government spending, but economists warned of potentially prolonged stagnation.
The low-growth outlook spills to the U.S. shores already affecting the holiday shopping season revenues. Consumer spending in the U.S. fell to $50.9 billion over the past four days of Black Friday shopping, down from $57.4 billion in 2013, the National Retail Federation said in a statement. It was the second year in a row that sales declined during the post-Thanksgiving Black Friday weekend, which had long been famous for long lines and frenzied crowds.
Economists at Oxford Economics estimated in a recent report that oil prices at around $60 a barrel over the next two years would offer “a significant strengthening” of economic growth “for most of the major advanced and emerging economies.” Growth could rise by 0.4 percentage point in China and the U.S. above current expectations. Lower energy costs could also raise growth by 0.1 to 0.2 percentage point in Europe and Japan.
At the same time, falling inflation expectations were likely to strengthen the existing bias by central banks to ease money supplies, said economists at Barclays, providing added fuel to economies alongside lower energy prices.
Larger economies are better insulated from a downturn in global growth because they are less reliant on overseas export demand.
