FXStreet (Guatemala) – Analysts at Scotiabank explained that there is no shortage of issues that could weigh against a stronger and more sustainable rebound in global activity.
Key Quotes:
“With regard to Greece’s latest sovereign debt crisis, there appear to be much stronger financial backstops put in place by the European Central Bank (ECB) and the euro zone to contain the regional fallout associated with a potential ‘Grexit’. Even so, any adverse consequence could eventually morph into a more systemic problem with global financial and economic consequences if the contagion is allowed to affect other highly indebted nations in both Europe’s periphery and core countries.”
“Another concern is the absence of more synchronized growth internationally. China’s continuing slowdown has contributed to the significant moderation in global trade flows, notwithstanding ongoing efforts to ratify trade-expanding deals. Oversupply conditions persist in a number of areas, most notably commodities, with prices at or close to cyclical lows. Many businesses are continuing to reduce costs by focusing on boosting operational efficiencies through the elimination of under-performing business lines and through strategic investments, including mergers & acquisitions.
“Since monetary policy in most countries has already been extensively utilized and has less manoeuvring room, some countries and jurisdictions are utilizing expanded infrastructure expenditures to provide the additional thrust needed to support stronger growth.”
“There is still uncertainty over the extent of the U.S. consumer spending revival underway. The continuing strength in job creation has yet to significantly translate into increasing wage and income gains. While there is considerable pent-up demand for goods and services, U.S. households appear to have become more cautious shoppers, with a propensity to save more and pay down debt. Demographic factors are also in play, with millennials’ shopping patterns and student debt burdens contrasting with those of ageing and asset-rich baby-boomers. The housing market will be key to the U.S. consumer spending outlook. Confidence is on the rise, but so are mortgage rates. The sharp rise in borrowing costs during the 2013 ‘taper tantrum’ quickly short-circuited the fledgling housing recovery.”
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