The escalation of trade tensions is having much bigger effects on financial markets and oil prices than on real economic performance at the global level. That said, there is clear evidence that global growth has slowed following a solid start to the year. The US, in particular, has seen a sharp drop in its PMIs and manufacturing confidence has continued to weaken across the board. Meanwhile, consumer spending has failed to recover the ground that was lost at the turn of the year. What’s more, there is now firmer evidence that economic weakness has spread to labour markets in several economies. We continue to think that the slowdown has further to run, regardless of whether trade tensions ease or not. This is in contrast to the consensus view that global growth will soon regain pace.
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