Global growth outlook for 2019 dims for first time — poll

US President Donald Trump’s administration threatened duties on $267 billion of Chinese goods on top of tariffs already levied on $250 billion previously . (Reuters)
Updated 22 October 2018
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Global growth outlook for 2019 dims for first time — poll

  • At the start of 2018, optimism about a robust global economic outlook was almost unanimous among respondents
  • But with no let-up in the US-China trade war, growth forecasts point to more pain ahead

BENGALURU: The outlook for global growth in 2019 has dimmed for the first time, according to Reuters polls of economists who said the US-China trade war and tightening financial conditions would trigger the next downturn.
At the start of 2018, optimism about a robust global economic outlook was almost unanimous among respondents.
But Reuters polls of more than 500 economists taken this month showed a downgrade to the outlook for 18 of 44 economies polled, with 23 unchanged. Only three were marginally upgraded.
While risks from trade protectionism have been consistently highlighted by Reuters polls since January last year, the latest indicated that growth in about 70 percent of 44 economies surveyed has already peaked.
“A simple dynamic is playing out in the global economy right now: the US is booming, while most of the rest of the world slows or even stagnates. The stresses caused by this divergence are playing out uncomfortably in many emerging markets,” noted Janet Henry, global chief economist at HSBC.
“A US Federal Reserve that is raising interest rates to prevent the US economy from overheating is constraining the policy options of countries where financial conditions are tightening and trade tensions intensifying.”
The latest shift in growth expectations comes on the heels of a deep sell-off in financial markets, especially emerging ones, largely driven by trade concerns.
A majority out of nearly 150 economists said the top two triggers for the next global downturn were a further escalation of US-Sino trade tensions, and tightening in financial conditions driven by a deep sell-off in global equities or a rapid rise in government bond yields.
“First, there would be no winners from a global trade war. Even if the aggregate costs are modest and skewed toward more open economies, all countries would ultimately be worse off compared to the status quo,” noted Neil Shearing, group chief economist at Capital Economics.
“(it)... would inflict lasting damage to growth and cause a permanent loss of output.”
US President Donald Trump’s administration threatened duties on $267 billion of Chinese goods on top of tariffs already levied on $250 billion previously — amounting to almost all imports. Beijing retaliated.
A majority of economists covering the US economy who were asked an additional question said US economic policy toward China over the next few years would become more confrontational.
Along with faster-than-expected increases in US interest rates compared to the previous poll, that points to a substantial slowdown in the US economy by late next year, even as it remains the current major driver of global growth.
But only a slim majority expect US wage growth to pick up meaningfully before the next recession.
“The risk of a self-inflicted wound in the US is rising. The dominant downside risk to the global outlook remains the Trump Administration’s attempt to rebalance trade with China through tariff policy,” noted Jean-François Perrault, chief economist at Scotiabank.
“The consequences of escalating trade actions are undeniable: higher prices in China and the US, less purchasing power for consumers in these countries, higher input costs, heightened financial market volatility, and possibly higher interest rates. These effects would likely spill over from these countries.”
While global growth this year will hold strong, unchanged at July’s 3.8 percent prediction, the consensus for 2019 was 3.6 percent, a cut for the first time since polling began for that period in July 2017. That was also lower than the International Monetary Fund’s recent 2019 projection of 3.7 percent.
The European Central Bank was not expected to extend its bond-buying program beyond this year, despite additional economic and political concerns from Italy and Brexit negotiations mounting.
But with no let-up in the US-China trade war, growth forecasts point to more pain ahead — not just for developed but also emerging market economies.
From China to Turkey and Africa to Latin America, growth forecasts for the coming year were downgraded.
“There has been an abrupt ‘stop’ of capital flows to EM (emerging markets) over recent months, which has created painful consequences for EM with large external deficits,” said Adam Slater, a lead economist at Oxford Economics.


Oil prices edge up as OPEC says its crude output fell sharply in Dec

Updated 6 min 27 sec ago
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Oil prices edge up as OPEC says its crude output fell sharply in Dec

SYDNEY, Australia: US oil prices inched higher on Friday after a report from the Organization of the Petroleum Exporting Countries showed its production fell sharply last month, easing fears about prolonged oversupply.
US West Texas Intermediate (WTI) crude futures were at $52.40 per barrel at 0026 GMT, up 32 cents, or 0.6 percent, from their last settlement. WTI futures closed down 0.4 percent on Thursday.
International Brent crude oil futures had yet to trade, after closing up 1.1 percent in the previous session.
OPEC cut oil output sharply in December before a new accord to limit supply took effect on Jan. 1, it said on Thursday, suggesting that producers have made a strong start to averting a glut in 2019 as a slowing economy curbs demand.
“The OPEC+ production cuts (that stared this month) will be paramount to keeping the market tight and supporting prices,” ANZ said in a research note. The body is making cuts along with other major producers such as Russia.
OPEC said in its monthly report that its oil output fell by 751,000 barrels per day (bpd) in December to 31.58 million bpd, the biggest month-on-month drop in almost two years.
But tempering that support for prices, OPEC also cut its forecast for average daily demand for its crude in 2019 to 30.83 million barrels, down 910,000 bpd from the 2018 average.