More economic stimulus may be required to counter a flagging global recovery, suggests National Bank Financial in a new research note.
In the note, NBF observes that repeated liquidity injections by the global central banks, since the onset of the global financial crisis, “have been instrumental in limiting the impact of a negative wealth effect from housing and helping avoid a global depression”.
Yet, it says, according to the latest data, home prices remained depressed in most countries in the first quarter. Four of the G7 economies reported price declines during the quarter (U.S., Japan, France and Italy), it notes.
“The current economic backdrop in the matured economies of the OECD is therefore characterized by a deleveraging process of governments and financial institutions while household net worth is negatively impacted by falling home prices. These conditions are hardly auspicious for strong economic growth in the medium term,” it says, adding, “The recent waning in economic momentum suggests that further stimulus may yet be required.”