The Forward View – Global: November 2019

This month we have recorded a podcast to accompany the Forward View – Global, giving you a 10 minute summary of our key forecasts this month. Listen now.

• Hopes of a US-China ‘Phase One’ trade agreement have lifted financial markets. While it is unclear if existing tariffs will be rolled back, should a deal be agreed it would suggest a lower risk of an extreme tail event and may lift business confidence. Less clear is whether the drag on business investment from the unclear nature of future trading relationships will change. Our forecasts are based on announced trade policy but the hopes of a deal suggests more upside risk than have been evident for a while.
• At the same time expectations of further major Advanced Economy (AE) monetary policy easing have been dialled back, although the recent easing that has been put in place is likely to remain for an extend period.
• Major AE growth appeared broadly steady in Q3 but we expect further slowing going forward. The most recent business surveys are consistent with subdued growth in the Eurozone, further slowing in the US and a turn for the worse in Japan (in part due to the increase in its Value Added Tax). We don’t expect major AE growth (on a yoy basis) to stabilise until mid-2020.
• Our forecasts for global economic growth are unchanged this month, however there has been some shift in the underlying forecasts for key regions. Our upward revision to US economic growth for 2019 and 2020 was offset by our downward revision to Chinese and East Asian growth. This means that we expect the global economy to expand by a sub-trend 3.1% and 3.2% in 2019 and 2020 respectively, before returning to the long term trend of 3.5% in 2021. Recoveries in Indian and Latin American growth are the key contributors to the 2021 upturn, but there is considerable uncertainty around the growth prospects for these economies.

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