• Financial markets have continued to recover, albeit still remaining below previous peaks, however this is on the back of more dovish monetary policy expectations, rather than underlying economic strength.
• Economic trends have generally softened – growth in major advanced and emerging market economies slowed in Q4, and more timely indicators (such as PMI surveys and our leading indicator) point to further slowing. This is particularly the case in manufacturing, which is more trade exposed than services.
• However this slowdown goes beyond global trade concerns, with weak domestic demand in a range of countries – particularly private consumption and business investment in non-US advanced economies. This broad based deterioration suggests that the any economic benefits derived from a cooling in US-China trade tensions should not be overstated.
• Given the recent negative trends, we have revised our growth forecasts lower for 2019 to a sub-trend 3.4%. A weaker profile for the Euro-zone, Japan and Latin America were the main contributors to this downward revision. Our leading indicator implies further weakness through to the middle of 2019, and suggests the risk to our forecasts is on the downside. That said, we expect growth to stabilise into 2020, in part due to the dovish turn in policy settings.

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