• Economic growth continued slowing into Q4 last year – with China and the Euro-zone leading the way lower, while growth in the United States is expected to have come off its 2018 highs.
• Early indicators – such as global PMI survey measures – point to a further softening in the global economy into early 2019. Weaker manufacturing surveys suggest that global industrial production – which had been slowing for several months to the latest reading in November – is likely to ease further. However indicators for the larger service sector are holding up better, particularly in EM economies.
• Given the softer economic conditions, expectations around major central bank monetary policy have become more dovish – with comments from the US Fed that they will be more “patient” going forward. This has helped reverse some of the deterioration in financial conditions that occurred in late 2018.
• Our forecasts for global growth have been revised lower in 2019 – down to the long term trend rate of 3.5% (from 3.6% previously). Slower growth in the US, the Euro-zone and China are the key drivers of this trend. We expect growth to stabilise at this level in 2020, partly as a result of a dovish shift in policy.
• There are upside and downside risks to these forecasts, with greater downside in the short term if the slowdown in Euro-zone growth or the negative effects from Brexit/trade uncertainty end up greater than expected. However, the longer the weakness in growth persists, the greater the incentives for a resolution to these disputes, which would be supportive of growth further down the track.

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