Features

Global economic growth is slowing

Economic growth dipped in all major economies in the first quarter, even slipping below zero in Japan.

898_MW_P05_Markets

US shoppers didn't get the memo about a downturn

In 2017 the world economy "broke out of a rut", saysThe Economist. It finally shook off its post-crisis hangover, expanding by 3.8%, the fastest pace since 2011. Business investment took off again and global trade growth reached 4.9%, also an eight-year high. But in the past few weeks "the glow has begun to fade". The recovery that the International Monetary Fund heralded in April as "broader and stronger" seems to have become narrower and weaker.

Growth dipped in all major economies in the first quarter, even slipping below zero in Japan. A widely watched survey of manufacturing, JP Morgan's global PMI index, fell to a six-month low in March.

World trade, moreover, "has softened significantly" in recent months, says Capital Economics. Growth in air-freight traffic has been slipping since the middle of 2017. Export volumes from emerging and advanced economies declined in March. And all this against a backdrop of ongoing tension over trade between China and the US.

Europe is the weakest link

Last year investors in Europe fretted about political problems that failed to materialise and were surprised by economic growth they hadn't expected, says Richard Barley in The Wall Street Journal. "This year is starting to look like the opposite of that happy picture." The eurozone's GDP expanded by just 0.4% between January and March, down from 0.7% in the previous three quarters. German growth halved.

An index tracking the extent to which economic data exceeds expectations "is languishing deep in negative territory"; there have, in short, been few upside surprises of late. The latest crisis in Italy will hamper activity there, while previous euro dramas have had a knock-on effect on confidence across the bloc.

For now, however, none of this amounts to anything beyond a slight slowdown in the pace of global growth.As The Economist points out, surveys of economic activity in Europe, China and the US are, collectively, higher than they have been 83% of the time over the past ten years. The poor weather seems to have played a part in reducing European growth in the first quarter of 2018. As for the world's biggest economy, "strong retail sales and high consumer confidence suggest that if a downturn is coming, Americans have missed the memo".

A trade war, meanwhile, remains a danger, but bear in mind that US presidents always like to approach mid-term elections with low unemployment and rising stock prices, says Karen Ward in the Financial Times. Markets shudder when there is bad news on this front. "It may soon be in President Donald Trump's political interests to dial it down." All told, the "cracks in the global growth story do not look fatal for equities".

Recommended

Bondholders beware – inflation is coming, says Jeremy Siegel
Inflation

Bondholders beware – inflation is coming, says Jeremy Siegel

With vaccines promising an end to lockdowns, inflation won't be far behind, warns Jeremy Siegel, professor of finance at Wharton.
26 Jan 2021
The Arab Spring ten years on: a revolution that failed to blossom
Global Economy

The Arab Spring ten years on: a revolution that failed to blossom

Ten years ago, the Arab world was rocked by mass protests and popular uprisings that ousted long-reviled dictators. For the most part, the end result …
23 Jan 2021
The charts that matter: inflation, bubbles, and booze
Economy

The charts that matter: inflation, bubbles, and booze

As US stocks head higher into bubble territory, John Stepek looks at the charts that matter most to the global economy.
23 Jan 2021
Inflation is the easiest way out of this – just don’t expect politicians to admit it
Inflation

Inflation is the easiest way out of this – just don’t expect politicians to admit it

The UK government borrowed £34.1bn in December, a record amount for that month. Britain's debt pile now amounts to 100% of GDP. How are we going to pa…
22 Jan 2021

Most Popular

The FTSE 100 is set for a makeover with an influx of new tech stocks
UK stockmarkets

The FTSE 100 is set for a makeover with an influx of new tech stocks

The FTSE 100 – the dullest index in the world – is about to reinvent itself as a host of new firms list on the market. The change is long overdue, say…
24 Jan 2021
Think Tesla is a bubble? This might be the best way to bet on it bursting
Oil

Think Tesla is a bubble? This might be the best way to bet on it bursting

The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. …
25 Jan 2021
Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021