• After modest improvement in Q1, partial indicators in major advanced economies (AEs) point to a renewed easing in growth in Q2. Growth is expected to slow further in the second half of 2019 driven largely by the US economy. The latest business surveys also point to emerging market (EM) economic growth continuing to come under pressure.
• Following on from the tariff-induced uncertainty in May, financial markets have generally trended higher from early June. With global growth slowing, the policy outlook has turned more dovish and a reduction in central bank policy rates is likely both across AEs –led by the Fed –but also EM economies, where there has already been some policy easing so far this year.
• After having marked down our global growth forecasts over the last two months due to trade policy developments, the resumption of talks between the US and China is a welcome development. However, with the eventual outcome unclear, uncertainty remains elevated and it is likely to be a drag on investment. Moreover, possible future US trade action is not limited to China –the US may introduce auto tariffs or target ‘currency manipulators’ at some point. Other risks to the outlook include geopolitical issues (e.g. Brexit or oil supply disruptions) and US fiscal policy.
• We have left our forecasts unchanged this month, and expect global growth of 3.2% in 2019 and 3.3% in 2020. These rates of growth are below par, but not in recession territory, as the shift in global policy settings is expected to limit the growth slowdown currently underway.

Find out more in the The Forward View – Global July 2019.