Global economic growth should be somewhat softer next year as tighter financial conditions bite.
That is the view of economists at Goldman Sachs Group Inc led by Jan Hatzius, who said that fiscal policy is emerging as a key support for growth as other governments join the US in pulling fiscal levers.
“Looking ahead to 2019, we expect a similar contribution of fiscal stimulus to global growth as in 2018, but the composition shifts from being US-centric to being more broadly based across developing markets and emerging markets,” the analysts wrote in a note.
Photo: Reuters
While that would provide some cushioning for the global economy, it is hard to map out an absolute path for the world’s GDP growth next year.
“An increase in the price of oil, for example, could present a downside risk; and on the upside, continued slack and a long-awaited improvement in productivity could leave economies with more room to grow,” the economists wrote. “That said, our analysis suggests that growth in 2019 should be somewhat softer than it has been in 2018.”
Goldman’s preliminary global current activity indicator last month slipped to 3.7 percent from just above 4 percent mid-year and about 5 percent at the start of this year.
The shift is being led by China, where the economy’s weakest performance since 2009 is set to worsen unless a peace can be struck in the trade war with the US.
Factory readings from Asia already show a fallout, with Taiwan, Thailand and Malaysia slipping into contraction territory.
The eurozone too is losing momentum, expanding in the third quarter at half the pace of the prior three months as Italy and Germany stagnated.
It is a marked turnaround from April, when the IMF said the world was enjoying the most united upswing since 2010.
The mood changed last month when the IMF cut its global outlook for the first time in two years and said growth had plateaued.
There are other signs the peak has passed for the global economy.
IHS Markit’s purchasing managers’ indices (PMIs) for China and the eurozone last month retreated to drive the overall reading to an almost two-year low, while the US gauge was little changed.
Most countries have seen their PMIs decline over the past three months.
“The latest data strongly support the view that the best days in the post-2008 financial crisis growth cycle have been seen,” said Alan Ruskin, global cohead of foreign-exchange research at Deutsche Bank AG.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
Apple Inc has been developing a homegrown chip to run artificial intelligence (AI) tools in data centers, although it is unclear if the semiconductor would ever be deployed, the Wall Street Journal reported on Monday. The effort would build on Apple’s previous efforts to make in-house chips, which run in its iPhones, Macs and other devices, according to the Journal, which cited unidentified people familiar with the matter. The server project is code-named ACDC (Apple Chips in Data Center) within the company, aiming to utilize Apple’s expertise in chip design for the company’s server infrastructure, the newspaper said. While this initiative has been
GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, yesterday said that revenue would rise moderately in the second half of this year, driven primarily by robust demand for advanced wafers used in high-bandwidth memory (HBM) chips, a key component of artificial intelligence (AI) technology. “The first quarter is the lowest point of this cycle. The second half will be better than the first for the whole semiconductor industry and for GlobalWafers,” chairwoman Doris Hsu (徐秀蘭) said during an online investors’ conference. “HBM would definitely be the key growth driver in the second half,” Hsu said. “That is our big hope
The consumer price index (CPI) last month eased to 1.95 percent, below the central bank’s 2 percent target, as food and entertainment cost increases decelerated, helped by stable egg prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. The slowdown bucked predictions by policymakers and academics that inflationary pressures would build up following double-digit electricity rate hikes on April 1. “The latest CPI data came after the cost of eating out and rent grew moderately amid mixed international raw material prices,” DGBAS official Tsao Chih-hung (曹志弘) told a news conference in Taipei. The central bank in March raised interest rates by