State Street Global Advisors has downgraded its growth forecasts for two major economies following sub-par growth in the past six months.
In its 2016 Global Market Outlook update, State Street Global Advisors (SSGA) noted that both the US and Japanese economies have slowed more than anticipated, with forecast growth for 2016 dropping by 0.5 per cent in both countries.
Currently, SSGA expects the US economy to grow 2 per cent, with Japan’s growth forecast at only 0.7 per cent. Forecasts for the European economy remain unchanged at 1.6 per cent.
The loss of momentum in growth, the report said, came partially off the back of turbulent oil prices at the beginning of the year.
“The larger-than-anticipated drop in oil prices in the fourth quarter of last year and first quarter of this has caused inflation to surprise to the downside, particularly in Japan and the eurozone,” it said.
Despite the subsequent rally in oil, SSGA maintain their hypothesis from the start of 2016 that commodities will underperform in 2016.
“The sharp rise in commodity and bond prices may be difficult to sustain, so we maintain our original outlook for the second part of the year,” it said.
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