Household consumption expenditure surged in the first quarter in anticipation of consumption tax increases, resulting in a strong GDP growth performance in the quarter. Second quarter growth is expected to be negative as the higher taxes take effect. The past year has also seen slowing growth in a number of the larger emerging market economies.
This followed a slowdown in China and a reversal of capital flows to emerging markets in the wake of indications that the US Federal Reserve (the Fed) would taper its bond-buying programme. Growth in China has been negatively impacted by concerns about the shadow banking system, the overheating housing market and tightening credit conditions.