• While global growth remains above average, available GDP data for Q3 point to a slowdown in the second half of the year. Business surveys also indicate a slowdown is underway, particularly in manufacturing, but there are tentative signs that overall activity may be stabilising. This is consistent with the message from our leading indicator.
• With growth slowing and increasingly divergent, central banks (on average) lifting policy interest rates, trade disputes and other events creating an uncertain back drop, financial market volatility has lifted. In October, there were large falls in equity markets, including in the US. Commodity prices also declined in the month, but this was largely driven by an easing in crude oil supply concerns, which is a welcome development if sustained.
• The divergence in the growth rates between the major advanced economies (AEs) that emerged in the first half of 2018 has carried over into Q3. The US economy posted another strong result, while Euro-zone growth slowed noticeably and Japan’s economy went backwards, although some temporary factors appear to be partly responsible. Economic growth in the major emerging markets (EMs) likely slowed in Q3 – driven by weaker growth in China and a probable slowing in India’s growth. After deteriorating for much of this year, EM financial markets have recently shown some signs of stabilising, but are likely to keep coming under pressure from US monetary policy tightening.
• We expect above average global growth in 2018 at 3.7%, slowing to 3.6% in 2019 and 3.5% in 2020 (the long-term historical average). This expected slowdown is driven by advanced economies as US fiscal stimulus fades, monetary policy tightens and supply constraints bite. The US-China trade dispute is a headwind to growth, as well as a risk if there is further escalation.

For further details, please download the below document:

• The Forward View – Global: November 2018 (PDF, 280kb)