The Forward View – Global: December 2019

Amid conflicting trade signals, signs growth is stabilising

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Our podcast series to accompany the NAB Forward View – Global continues, giving you a 10 minute summary of our key forecasts this month. To listen, just click the link below.

Overview

  • Major Advanced Economy growth was little changed in Q3. However, we expect US growth to ease somewhat further and Japan’s economy is set to contract in Q4, although the yoy growth rate is likely to bottom out by mid-2020.
  • In contrast, growth in Emerging Market economies eased slightly in Q3. This was driven by a slowdown in China and, in particular, India which experienced its weakest rate of growth since Q1 2013. We expect EM growth to pick up from here. This is in large part based around an expected recovery in India, as well as in Latin America, but there is a high degree of uncertainty around the timing and extent of the recovery in these regions.
  • Our tracking indicator of global GDP growth for Q3 is at 3.0% yoy, the same as in Q2.  Moreover, our global leading indicator suggests that growth may have bottomed out, while the global manufacturing PMI has started to turn around. These indicators are consistent with our forecasts for global growth (on a yoy basis) to remain around current levels before strengthening from mid-2020. The easing in monetary policy that has occurred this year – particularly in the US and EM economies – should support global activity and there is a move towards fiscal support in some countries as well.
  • Trade policy related uncertainty has been one factor weighing on global growth. At the time of writing it is unclear whether the much talked about “Phase One” trade deal between the US and China will occur, or whether the tariffs scheduled for 15 December will be deferred or come into effect. Recent announcements by the US that it will remove steel/aluminium tariff exemptions for Brazil and Argentina, and threatening to impose tariffs on France and the EU, are a reminder that trade policy tensions are likely to remain a headwind for some time to come.

For further details, please see The Forward View – Global: December 2019