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Even if the Fed has stopped hiking interest rates sooner than we originally envisaged, we doubt that will prevent a marked economic slowdown this year. After all, that dovishness was partly prompted by the more severe than expected downturn in global …
6th February 2019
The weakness of German consumption growth last year resulted partly from problems in the auto industry and partly from slowing real household income growth. Spending growth will probably accelerate a bit in the coming months, but not enough to prevent …
4th February 2019
Markit’s manufacturing PMIs for January add to evidence that the world economy is in the midst of a considerable slowdown and that the risk of a euro-zone recession is rising. The US remains a relative bright spot, but its resilience is unlikely to last …
1st February 2019
In advanced economies, monetary and credit conditions remain supportive. But bond issuance has been declining sharply in recent months, and credit growth in China is still slowing. … Monetary Indicators Monitor …
Signs of weakness in the global economy seem to have prompted a significant change of tack from central banks. Even in the US, where growth has so far held up well, the Federal Reserve appears reluctant to raise interest rates again and we are …
31st January 2019
A new strand of economics called “Modern Monetary Theory” (MMT) is seen by its advocates as a solution to the flawed economic thinking that contributed to the financial crisis. The ideas behind it could be a useful addition to the possible toolkit if …
After ending 2018 on a very weak note, world trade growth is likely to slow this year as the global economy loses momentum. A slowdown in world trade is highly likely regardless of whether the US and China are able to reach a deal before the end of the …
28th January 2019
Slower global growth will bring the downward trend in unemployment seen in developed economies in recent years to a halt and actually push unemployment up in some countries including the US. This should knock on the head any lingering risk of an imminent …
25th January 2019
We have long thought that the world economy would slow significantly in 2019, but the Flash PMIs for January provide an early sign that growth may be deteriorating more quickly than even we had assumed. … Industry slowdown has further to …
24th January 2019
On the face of it, the slowdowns currently seen in many countries appear attributable to a range of country-specific factors. But could we be missing the wood for the trees? Although there is little evidence of any particular global factor driving down …
China’s slowdown looks set to be of a similar scale to that in 2015/16. In terms of imbalances and financial market vulnerability, the world now looks better placed to withstand it. But against a backdrop of various concerns about other economies, …
23rd January 2019
A number of EMs, particularly in Asia, look vulnerable to the impact of a China slowdown – and are just as exposed as they were when fears of a China ‘hard landing’ flared up in 2015. While we wouldn’t downplay the risks from slower growth in China to the …
22nd January 2019
Global growth looks set to fall to its weakest pace since the financial crisis as slowdowns in the euro-zone and China continue and the US soon joins the mix. Against that backdrop, fears of a surge in inflationary pressure have now been put to bed. US …
With Prime Minister Theresa May now holding cross-party talks, the chances have risen of a “soft” Brexit, resulting in the UK retaining closer ties with the EU than her defeated deal would have involved. A new set of negotiations would prolong the Brexit …
18th January 2019
The Fed’s promise to be “patient” is why we now forecast just one additional rate hike in the first half of this year, with the fed funds rate peaking at 2.50-2.75%. But we are increasingly confident in our view that a slowdown in economic growth to below …
To the outside world, it looks as though the UK is descending into chaos over Brexit. But while it is true that the UK political situation is in meltdown, its economy is holding up reasonably well. And while the UK would suffer some short-term economic …
17th January 2019
Several of the world’s most overvalued housing markets have taken a turn for the worse, and history suggests the risks of large house price corrections are greatest where monetary conditions are tightened. … House prices most vulnerable in Hong Kong & …
Recent downward revisions to our forecasts for advanced economies, particularly for the euro-zone, mean that we now think that global growth will fall by 2020 to its slowest pace since the financial crisis. This will keep inflation low and prevent …
14th January 2019
The drop in industrial production in many countries in November is another sign that the global economy is starting to weaken. Although the figures can be volatile, other evidence points to further weakness in the industrial sector ahead. … Falls in …
11th January 2019
Given the huge and growing uncertainty surrounding Brexit, we are now placing much more emphasis on three forecasts for the economy that are based on different Brexit outcomes. The key point, though, is that in each scenario we are a bit more optimistic …
10th January 2019
Many of the indicators that tend to turn first around peaks in the business cycle are now flashing red in several major economies. Admittedly, some survey measures of confidence and real activity remain at fairly high levels by past standards. But their …
4th January 2019
Today’s cut to the required reserve ratio is partly about managing liquidity ahead of Chinese New Year. But it is also intended to provide support to the economy and will be reinforced with further easing soon. Given the pressures the economy is facing …
Markit’s global manufacturing PMI dropped again in December, adding to evidence that the world economy ended 2018 on a weaker footing. We think that activity will lose further momentum this year. … Soft business surveys set tone for …
2nd January 2019
Many of the financial and economic indicators that turn first around business cycle peaks are now flashing red in advanced economies. This is consistent with our view that the recent loss of momentum in the world economy will develop into a more severe …
21st December 2018
Global economic growth will slow over the next twenty years even as a productivity revival in many mature markets helps to offset a steady decline in population growth. Emerging markets will continue to grow faster than their more established counterparts …
20th December 2018
Having considered seven commonly-cited indicators of the state of global economic growth, we conclude that trade volumes and Markit’s PMI surveys provide the best guide to the state of activity in real time. Based on their latest readings, we think that …
18th December 2018
This time last year we predicted that 2018 would be another good year for the world economy but that “the expansion in advanced economies will begin to falter towards the end of the year.” We went on to say that we thought the downturn would be sharpest …
14th December 2018
Markit’s flash PMIs ended the year on a weak note, signalling the start of a US slowdown and pointing to weaker world trade growth at the beginning of 2019, despite the US-China truce on tariffs. … Soft business surveys a sign of things to …
Headline inflation is set to decline in the coming months, due to the recent slump in oil prices, and we think it will remain below 2% in most advanced economies next year. Tightening labour markets have already fed through to higher average earnings …
13th December 2018
The US slowdown that we anticipate next year will weigh on global growth, but the impact will be relatively mild by past standards. This means that interest rates in some areas will be rising at the same time as the Fed is cutting rates. However, a …
7th December 2018
The latest surveys and hard data suggest that the world economy has not regained any momentum in Q4. While the recent slump in oil prices should support global growth, we think that activity will soften over the next year or so, led by slowdowns in the US …
6th December 2018
The trade ceasefire agreed by Presidents Donald Trump and Xi Jinping bears a striking resemblance to the ill-fated deal reached back in May but, with Trump himself having personally negotiated the latest deal, this one has a much greater chance of leading …
3rd December 2018
The latest batch of business surveys suggests that the slowdown in global manufacturing continued in November. In particular, there was no sign of a rebound in the euro-zone despite the end of the temporary delays to car production, and activity in China …
The most that can reasonably be hoped for from talks between Xi Jinping and Donald Trump at this weekend’s G20 meeting is an agreement which temporarily reduces US-China tensions. Meanwhile, the wider agenda for the summit, and the G20 itself, now looks …
29th November 2018
The Fed looks to be on course to raise interest rates by a further 25bp at its December meeting in spite of financial market jitters and disappointing news on the global economy. But as financial conditions continue to tighten and the US economy slows …
28th November 2018
The recent fall in oil prices should give a small boost to global economic activity in the coming year or so. Households will benefit from reduced inflation while any offsetting reduction in mining investment, and tightening of fiscal policy in EM oil …
27th November 2018
Another month, another set of downbeat PMI surveys. Markit’s flash PMIs for the euro-zone were especially weak, dampening hopes that growth will rebound in the fourth quarter. … Surveys point to slower growth in …
23rd November 2018
Having rounded off Q3 on a disappointing note, we think that world trade volumes will lose more momentum in the coming year or so as global demand weakens due to slowdowns in the US and China. A marked escalation of trade tensions would, of course, turn …
It is possible that Theresa May will persuade enough MPs to back her deal in Parliament, if only by arguing that the alternatives are even worse. But it is far from certain. In this Update , we set out five possible outcomes if the deal is rejected in …
21st November 2018
Households’ balance sheets are mostly in good shape and so are unlikely to cause any major trouble. But households in a few economies would be vulnerable if interest rates were to rise by more than we expect. … Households can cope with rate hikes (in most …
20th November 2018
Former Fed Chair Janet Yellen recently added to the growing chorus of concerns about the deterioration in corporate lending standards in relation to “leveraged loans” and the possibility that they pose a systemic threat in advanced economies. This Update …
15th November 2018
News that Theresa May could soon face a leadership challenge is the latest twist in the Brexit saga, but even if she survives, the key point is that the chances of her deal being passed by parliament are not looking good. There is therefore still a good …
The causes of economic downturns have changed over time, from harvest failures and wars, to monetary policy, oil shocks and financial crises. Looking ahead, we think the next major global downturn will probably be caused by another financial sector shock. …
13th November 2018
China is the only major economy which is likely to implement a significant policy stimulus in the coming year. However, its impact on the rest of the world will be small. … China stimulus will not prevent global …
8th November 2018
