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The key takeaway from today’s policy announcements at the opening of the National People’s Congress in China is that the leadership are still trying to balance efforts to support growth with concerns about financial risks. Officials pledged some moderate …
5th March 2019
Recent moves to tighten restrictions on foreign e-commerce firms are more a reflection of the Indian government wanting to boost popular support ahead of the general election than a fundamental shift in attitudes towards FDI. If the Modi government wins …
4th March 2019
We do not expect the trade deal that is taking shape between the US and China to transform the outlook for the world economy, not least because we always argued that the adverse effects of new and threatened bilateral tariffs would be small. But the …
Central bank independence seems to be increasingly under attack, raising fears that the success of central banks in anchoring inflation and inflation expectations in recent years could be reversed. We think that these fears are misplaced for developed …
February’s manufacturing PMIs suggest that the industrial downturn in advanced economies has worsened. Even the US is showing signs of succumbing to the widespread deterioration in industrial output. … Industrial downturn …
1st March 2019
A look at recent figures on stockbuilding and inventories provide another reason to think that the economic cycle has turned downwards. … Inventories data also hint at a …
The latest communications from advanced economy central banks imply that they have shifted away from a normalisation path towards closely monitoring incoming data to ascertain whether additional policy stimulus might be needed. Here, we outline the data …
28th February 2019
This Update cuts through the Brexit quagmire by highlighting four things we now know about Brexit, four things we don’t, and four implications for the economy and the financial markets. … The knowns and the unknowns of …
The computer revolution is positive for economic growth, but it also means that technological risks must be added to the threats facing the global economy. While the economic impact of the internet “going down” for a few days would actually be very small, …
26th February 2019
Since major euro-zone economies are more globalised than most, they are more sensitive to turns in the global business cycle. This partly explains why, having outperformed in 2017, they have underperformed during the past year while growth in the US has …
22nd February 2019
The economic cycle in most EMs has passed its peak and a combination of domestic headwinds and a slowdown in the global economy means growth will be weaker than most expect across the emerging world. One consequence is that monetary tightening cycles will …
21st February 2019
February’s flash PMIs show that the manufacturing downturn has deepened throughout advanced economies. The one comfort is that the surveys reported a pick-up in services sector activity. … Manufacturing sector has lost more momentum in …
We think that tariffs imposed in the past year can account for only a small part of the slowdown in global trade growth over the same period. The threat of future tariffs might also have hit trade through its effect on business confidence and investment. …
20th February 2019
Concerns that policymakers in developed countries do not have the tools to fight the next downturn are generally misplaced. There is plenty more they could do. The constraints will instead be reluctance to prolong the adverse side-effects from the use of …
15th February 2019
The recent contrast between a weakening euro-zone and resilient US seems to reflect the former’s higher exposure to world trade and the relative weakness of real disposable incomes growth there. We expect the gap to narrow as the US feels the effects of …
14th February 2019
The slowdown in growth in the emerging world this year is likely to be unusually broad-based. That will set a downbeat mood for EM assets over the course of this year. … EM slowdown to be …
13th February 2019
We expect financial conditions to tighten further this year in major advanced economies reflecting, but also exacerbating, slower economic growth. To monitor levels of stress in the financial system and the ease with which finance can be accessed, we have …
8th February 2019
Amid growing fears about the outlook for the global economy, it is worth highlighting where we and the consensus might be positively surprised. Possibilities include resilient US growth, a boost to consumer spending from falling oil prices and a pick-up …
7th February 2019
World GDP growth held up well in Q4, but there is clear evidence in surveys and other timely indicators that the global economy took a turn for the worse at the start of 2019. The weakness has been most acute in the euro-zone, where industrial production …
6th February 2019
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 …
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