The global economy’s sharp loss of speed through last year has left the pace of expansion the weakest since the global financial crisis a decade ago, according to Bloomberg Economics.
Its new GDP tracker puts world growth at 2.1 percent on a quarter-on-quarter annualized basis, down from about 4 percent in the middle of last year.
While there is a chance that the economy could find a foothold and arrest the slowdown, “the risk is that downward momentum will be self-sustaining,” economists Dan Hanson and Tom Orlik said.
The reasons for hope? The US Federal Reserve’s decision to pause its interest rate hikes, a US-China trade truce and the fading of the shocks that battered Europe last year could mean stabilization is around the corner.
Other central banks have stepped up. The European Central Bank (ECB) last week announced measures to help the economy through the current weakness.
However, the global economy is not out of the woods. The Organisation for Economic Co-operation and Development’s (OECD) latest composite leading indicator — published yesterday — indicates easing momentum in the US, the UK, Canada and the eurozone as a whole, including Germany and Italy.
However, there are signs of stabilization in China.
Despite the gloom, ECB policymakers have been eager to put a brave face on the deterioration, pushing the view that the eurozone is experiencing a slowdown, not a recession.
“We are still seeing robust economic growth, although it’s less strong than before,” ECB Executive Board member Benoit Coeure said in an interview with Italian newspaper Corriere della Sera published yesterday. “It will take longer for inflation to reach our objective, but it will get there. We are reacting to the developments we have seen so far.”
“The cyclical upswing that took hold of the global economy in mid-2017 was never going to last. Even so, the extent of the slowdown since late last year has surprised many economists, including us,” Coeure said.
There has been a modest pickup in some economic numbers, although it is difficult to ignore the high-profile disappointments.
Last week, the US reported employers added the fewest jobs in more than two years.
There might have been one-off factors to blame, but the scale of the miss puts in focus the idea that the economy’s lost steam.
This week, China will be in the spotlight with the release of retail sales, investment, credit and industrial production on the schedule.
Turkey yesterday reported data showing that it fell into the first recession in a decade.
In Germany, industrial output unexpectedly fell in January, although a large upward revision to December nullified some of the gloom.
Still, a manufacturing index points to an extended slump, and production has posted year-on-year declines three months in a row.
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