The latest data confirm that the world economy got off to a weak start this year. World trade has been one bright spot, as firms attempt to front-run tariffs. But business surveys have softened, and falling consumer confidence bodes ill for domestic demand in advanced economies. Services activity has slowed in China too, and by more than official data suggest. The legal ruling against tariffs in the US may grant only temporary reprieve, as the administration eventually reimposes tariffs one way or another. So, we still expect global growth of a bit below 3% this year. Meanwhile, labour markets remain healthy, with gradual cooldowns offering hope of wage growth easing in the months ahead. Indeed, while headline inflation has fallen this year, services inflation remains high, limiting the scale of interest rate cuts in the year ahead, especially in many parts of emerging Europe and Latin America.
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