US economic data has been surprising to the upside over the last couple of months. However, none of the structural headwinds that seem to have plagued the global economy in recent years (a mix of excessive indebtedness, deteriorating demographics, rising political uncertainty as well as the end of the China growth miracle and the commodity supercycle) have been resolved. According to Citibank, the following are some reasons to be concerned for global growth:
1.The Chinese stabilisation could be even more short-lived than currently expected. Much of China’s growth has been reliant on increasing debt.
2.One contributor to the potential stabilisation in China’s and emerging market activity has been the weaker US dollar and receding expectations of a US rate hike. The market may be under-pricing Fed rate hikes over the next two years.
3.A US downturn could threaten. While most US data has been decent recently, it has not been very strong. This leads to some caution, especially if there is more economic weakness to come.
4.Political risks in Europe are high and rising. This includes, Brexit, the refugee crisis, elections in Spain and extremist parties in a variety of European countries.
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