What’s in store for the global economy?
The last few months have seen the release of positive economic reports and grounds for optimism remain with regards to future growth rates, certainly in terms of the US economy. However, while no one is currently predicting the onset of a sharp slowdown or recession, there are signs that the global economy may be starting to lose momentum.
The OECD* composite leading indicator, which covers advanced economies plus China, India, Russia, Brazil, Indonesia and South Africa, has been in decline since peaking in January and slipped below trend in both May and June. This led the OECD to concede that its lead indicators are: “pointing tentatively to easing growth momentum”.
There are a number of potential issues that could act to restrain the pace of growth across the latter half of the year. Top of the list remains the re-emergence of protectionist policies and the continuing trade tensions between the US and the rest of the world. In addition, the prospect of a no-deal Brexit and the impact of monetary tightening in the form of interest rate rises, also have the potential to precipitate a softening in global growth over the coming months.
Deal or no deal?
Perhaps the principal area of concern in relation to global economic growth prospects, remains the spectre of a fullblown trade war. Such a possibility has been evident since Donald Trump was elected US President on a protectionist agenda nearly two years ago and still looms large.
The prospect of a no-deal Brexit did seem to increase during the summer months. Although the full ramifications are difficult to predict, it would seem safe to assume that such a scenario will have negative economic consequences for the UK, as well as causing economic upheaval across the rest of the EU.
While the UK government continues to suggest that securing a deal remains “the most likely outcome“, it recently started publishing a series of technical notices designed to prepare businesses, citizens and public bodies for the possibility of a no-deal Brexit. This new volume of literature will sit alongside the 68 technical notices that the EU has already produced on such an eventuality.
*Organization for Economic Cooperation and Development
The above is purely market commentary and does not constitute financial advice.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.