Trade-war side effects and cyclical weakness are tangled up in ugly economic data that continues to pile up across the board, while the prolonged U.S. government shutdown is making it harder to track the world’s biggest economy.
We’ll have to find a darker fairy tale as the popular-with-economists Goldilocks no longer has a place in describing this trajectory. Here’s our weekly wrap of what’s going on in the world economy.
Fighting the Slowdown
It’s a grim week in global growth when the brighter take is that Italy’s more in stagnation than recession. Elsewhere, the tone is almost universally downbeat, with an OECD gauge affirming a deep sluggishness in the world’s major economies. Outside of sour trade data, China also saw its first car sales dip three decades, adding to a slowdown that has the government cutting taxes to nudge consumption. Germany barely dodged a recession at the end of 2018, and Mario Draghi sees the weakness across Europe even as he doesn’t want to apply the R-word. Economic policy uncertainty is at a record high globally, and the likes of Brexit and the U.S. government shutdown are adding dark clouds on the horizon.
Clubs of Caution
Esther George won the week for monetary policy doves, as the famously hawkish regional Fed chief called for patience on raising interest rates. That marked just the latest sign that 2019 will be a year of caution at central banks, outlined in our quarterly decision guide. China’s quietly cutting borrowing costs while holding rates. The Bank of Japan probably will cut its inflation forecast on cheaper oil, and here’s a guide to its language on the yen. Brexit chaos could delay action at the Bank of England, and markets already were coming around to a more dovish view there. Turkey, Indonesia and South Africa all kept rates on hold.
And The Battles Go On
China’s chief trade negotiator is headed back to the U.S. at the end of the month for the next round of talks, but in the interim, global trade data hasn’t been looking good. China’s exports took an unexpectedly ugly turn at the start of the week, adding to pressures to get to a deal with the U.S. while the probe heats up against Huawei. India’s exports barely expanded in December from the previous year, Indonesia’s slumped by the most since mid-2017, and Singapore saw the worst exports drop in more than two years.
Meanwhile, Vietnam is aiming to balance trade with the U.S. and stay out of Trump’s crosshairs, according to a Bloomberg Television interview with the prime minister.