Glassman Quarterly Market Update

Global Economic Outlook

Executive Summary

  • Advanced economies are regaining speed, some—like the U.S. and Japan—more than others. This bodes well for the global economy in 2014. And it implies that emerging markets, which were slowed by Europe’s stall, too will benefit.
  • The impressive U.S. performance reflects the correction of the earlier real estate excesses that were brought under control by the securitized-finance-centric financial system.
  • Advanced economies suffer from considerable idle resources that drive much of the cyclical recovery. A period of above-trend growth is likely and needed to return most to full employment. 
  • Economic slack would not be so prominent in the setting of monetary policy, if inflation were stirring. But inflation remains too low in Europe, the U.S. and Japan. So the evolution of inflation and the inflation outlook will support accommodative monetary policies for the next several years.
  • 2014 is likely to see faster growth with low inflation and little movement in policy rates.

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