The global economy’s sharp loss of speed through 2018 has left the pace of expansion the weakest since the global financial crisis a decade ago, according to Bloomberg Economics.
Its new GDP tracker puts world growth at 2.1% on a quarter-on-quarter annualised basis, down from about 4% in the middle of last year. While there’s a chance that the economy may find a foothold and arrest the slowdown, “the risk is that downward momentum will be self-sustaining,” say economists Dan Hanson and Tom Orlik.
The reasons for hope? The Federal Reserve’s decision to pause its interest-rate hikes, a US-China trade truce and the fading of the shocks that battered Europe in 2018 could mean stabilisation is around the corner. Other central banks have also stepped up, with the European Central Bank last week announcing new measures to help the economy through the current weakness.
And despite the gloom, ECB policy makers have been keen to put a brave face on the deterioration, pushing the view it’s a slowdown, not a recession.
“We are still seeing robust economic growth, although it’s less strong than before,” Executive Board member Benoit Coeure said in an interview with Italian newspaper Corriere della Sera published Monday. “It will take longer for inflation to reach our objective, but it will get there. We are reacting to the developments we have seen so far.”
What Bloomberg Economists Say
“The cyclical upswing that took hold of the global economy in mid-2017 was never going to last. Even so, the extent of the slowdown since late last year has surprised many economists, including us.”
There has been a modest pickup in some economic numbers recently, including figures out of China signaling an improvement in credit supply.
But it’s hard to ignore the high-profile disappointing readings. US retail-sales numbers on Monday will be closely watched for a rebound from the biggest fall in almost a decade in December.
Last week, the US reported employers added the fewest jobs in more than two years. There may have been one-off factors to blame, but the scale of the miss puts in focus the idea that the economy’s lost steam.
On Monday, Turkey reported data that showed it fell into the first recession in a decade.
In Germany, industrial output unexpectedly fell in January, though a large upward revision to December nullified some of the gloom. Still, a manufacturing index points to an extended slump, and production has posted year-on-year declines three months in a row.