Global growth slows further with escalating trade disputes – NAB

Analysts at National Australia Bank notes that the global economic growth slowed further in Q2 2019 to around 3.0% yoy, its lowest level since end-2015.

Key Quotes

“This included a slowdown in major advanced economy (AE) GDP growth to 1.6% yoy in Q2 2019, down from the 2.5% pace of a year ago, and the lowest rate of growth since mid-2016. We expect this downward trend to continue through to early 2020 as the US-China trade dispute and other factors continue to weigh on growth.”

“Growth in the five largest emerging markets (EM) economies also slowed. This included India, where growth fell to its lowest level since early 2013. US-China trade war spill-overs are intensifying with EM export volumes falling in June 2019, particularly in East Asia (excluding China).”

“In the face of the global slowdown and subdued inflation, central banks are moving to support activity. For AE central banks this has mainly taken the form of signalling a change in the policy outlook but both the US Fed and the European Central Bank are expected to cut rates this month. In contrast, EM central banks have been more active in cutting policy rates.”

“Global growth is forecast to average 3.1% in 2019, before edging up to 3.2% in 2020 (previously 3.3%) as the global economy stabilises. Our global leading indicator is also currently pointing to growth stabilising heading into 2020. A recovery to the long term trend (3.5%) is expected for 2021. Key to the upturn is the support from easier monetary policy and cyclical recoveries in Latin America and India, as well as no further escalation in trade disputes or current geo-political risks (such as a no deal Brexit) being realised.”