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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
The Democrats were widely expected to win control of the House in yesterday’s midterm elections and the results set the stage for two years of legislative gridlock. President Donald Trump and the Democrats could work together to boost infrastructure …
7th November 2018
Global economic growth has held up quite well in recent months despite the sell-off in equity markets, but we expect it to slow over the next two years. The US economy is likely to cool as monetary tightening starts to bite and the boost from the fiscal …
6th November 2018
Markit’s manufacturing PMIs for October were a mixed bag, with steep falls in the euro-zone and UK sitting alongside small increases in other major economies. In aggregate, the surveys add to evidence that global growth has passed its peak. … Industry …
1st November 2018
Despite the recent plunge in equity prices, it looks highly likely that the Fed will raise interest rates again in December and then press ahead with two more rate hikes in the first half of 2019. But a slowdown in the US economy should discourage Fed …
31st October 2018
The fiscal “giveaway” announced by the UK government yesterday has generated a lot of headlines, but it is trivial in a global context, or compared to the US stimulus. For advanced economies overall, fiscal policy is unlikely to be a major factor either …
30th October 2018
We think that global GDP growth slowed to around 3% annualised in the third quarter and that it will weaken further over the next year or so as the US and Chinese economies lose momentum. … World economy to slow …
The news that Angela Merkel will step down as head of the CDU has limited implications for the German economy since she will stay on as Chancellor for now and her likely successors broadly support her policies. But it may well slow decision-making over …
29th October 2018
Classic EM crises have caused waves, but have rarely triggered global downturns. And in any case the current risk of a 1980s-style EM crisis is low. The bigger risk is of a China ‘hard landing’ which could result in a painful slowdown in global growth …
We expect the Fed’s monetary policy tightening cycle, which is now well underway, to contribute to a slowdown in the US economy during 2019-2020. And tighter monetary policy may also trigger downturns in countries with high household debt burdens and in …
26th October 2018
Credit growth in advanced economies is likely to maintain a healthy pace despite quantitative tightening. Meanwhile, the recent spike in Italian government bond yields may increase firms’ borrowing costs. … Monetary Indicators Monitor …
Although world trade growth has ticked up in recent months, we think that it will slow sharply in the coming year or so as global demand weakens. For now, it looks like tariffs under consideration should play a less significant role in dampening world …
25th October 2018
Preliminary Markit PMIs provide tentative evidence that the euro-zone economy will lag behind advanced-economy peers in Q4, as growth holds up better in the US and Japan. … Fortunes diverge in advanced …
24th October 2018
The Italian Government’s reply to the European Commission suggests that there is unlikely to be a quick resolution to the current fiscal impasse. We expect yields to rise in the coming years. … No end in sight for Italian fiscal …
22nd October 2018
Global growth is likely to ease over the next two years, led by slowdowns in the US and China. Although headline inflation should drop back in many advanced economies next year, core inflation will continue to rise. Against this backdrop we expect the Fed …
The apparent success of the US’s recent fiscal stimulus, at least in the short term, begs the question of whether other countries should, or will, follow suit. However, we think that most would struggle to emulate the US experience. … Other countries …
19th October 2018
While a disorderly no deal Brexit might, depending on its nature, deliver a significant short-term blow to the UK economy and financial markets, any global fallout would probably be small. … Global fallout from a no deal Brexit would be …
18th October 2018
After years of falling unemployment, wage growth has finally been picking up in the major advanced economies this year. However, the forces that have kept a lid on pay growth over the past decade are likely to prevent it from rising sharply, even at …
16th October 2018
It would require a significant escalation from the measures seen so far for a trade war to be the trigger of the next global downturn. The bigger risks at this stage are that lower-level skirmishes over trade cause problems for individual economies …
15th October 2018
After slowing sharply since the start of the year, we think that trade growth will lose further momentum in the coming months. But we doubt that there will be anything worse than a modest slowdown. … World trade likely to slow, but not …
12th October 2018
We broadly agree with the IMF’s latest growth projections for the world economy for next year, but we still think its forecasts are too optimistic for the US and too downbeat for the UK. And in contrast to the IMF’s projection of unchanged growth in 2020, …
9th October 2018
The strong showing for Jair Bolsonaro and his party in yesterday’s general election in Brazil has increased the chances of pro-market reform. This is likely to prompt an initial rally in local markets – we think the real might rise by another 3-5% against …
8th October 2018
The impact of a no deal Brexit on the economy would depend on what sort of no deal it was, but there would be at least some negative effect in the short term. If the UK left the EU on bad terms, the damage could be substantial. But this would be a one-off …
While we expect oil prices to fall back from their four-year high, a continued rise to $100pb would not deal a big blow to global growth. But it would exacerbate current account pressures in some EMs. … Should we fear oil at …
5th October 2018
The world economy seems to have lost some momentum in the past few months and we expect it to slow further in the coming year. World trade growth has fallen sharply, though this is due to weakening global demand rather than new protectionist measures, …
4th October 2018
A year after the Fed began shrinking its balance sheet, global central banks’ net asset purchases have slowed sharply, and they are set to turn negative in January. However, we doubt that this will cause a sharp sell-off in global bond markets or that it …
3rd October 2018
The new trade deal agreed with Canada and Mexico won’t in itself have much impact on the US economy. Along with the deal recently agreed with South Korea, however, it provides another example of President Donald Trump backing down from his hard-line …
1st October 2018
The fall in Markit’s global manufacturing PMI in September supports our view that global growth peaked in Q2. We think growth will slow further over the next two years as the US and China lose momentum. … Surveys weaken at the end of …
There are now only six months left to negotiate the deal under which the UK will leave the EU and move into a transition period. This Update lays out five key questions and answers on what still needs to be done, and the pitfalls that could lead to a …
27th September 2018