(MENAFN- ValueWalk) bank of America's October Global Fund Manager Survey revealed that of the 207 panelists with $585 billion in assets under management surveyed, 48% of respondents (up 5%) believe that over the next 12 months the global Economy is heading into a "Goldilocks" period of above-trend growth and below-trend inflation. 34% of respondents think that the economy will face below-trend growth and pay inflation.
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This is the most positive outlook managers have had on the economy for over ten years implying that finally, the world economy is starting to break out of its post-crisis slump and stagnation.
Pay inflation Signs Appearing
According to analysts at Nomura, there is indeed evidence building that global growth is "achieving escape velocity." In a report penned by Andrew Cates, European Economics analyst, Nomura notes that it appears "World trade growth, capital spending plans, labor market activity and credit demand appear to be combining with one another in a self-reinforcing cycle," which is generating an "unexpected boost to many economies' productivity growth."
However, despite the positive green shoots, one key indicator continues to lag: wage growth.
Cates notes that pay inflation is the last piece of the economic puzzle, but, as of yet, it remains elusive.
Nonetheless, the report goes on to say "Our analysis shows, however, that pay inflation is now beginning to pick up in a number of advanced economies." Nomura's analysis shows that this trend is expected to continue, supporting and adding to economic growth around the world, accelerating the global economic recovery. Overall, this improvement will support normalization of central bank monetary policy as the analyst explains:
"We maintain our view for now that the ECB will announce on 26 October that the size of its asset purchase programme will be tapered from EUR60bn to EUR40bn over the first six months of next year and then from EUR40bn to EUR20bn for a further three months beyond that. Other scenarios are possible including, for example, a nine-month taper at a pace of EUR30bn with no pre-set date – at first – for a cessation of the programme. We very firmly believe, however, that eurozone and broader global economic fundamentals do not really warrant this degree of ECB accommodation. In concert with a US Fed and Bank of England that will be lifting policy rates in coming months we further believe that Bund yields will ultimately head higher and maintain our year-end target of 75bp.
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