The global economy is stumbling into the new year after a battering from trade tensions and a manufacturing recession that dragged growth to the weakest in a decade.
Most major economies underperformed forecasts this year, perhaps no surprise given the uncertainty from the US-China trade dispute, which weighed on investment, as well as a drag from the huge slump in the German auto industry.
Heading into this year, there was plenty to worry about, from trade tensions and Brexit to the fact that the growth cycle was getting a bit long in the tooth. Some of the worst fears did not come to pass, but growth in major economies fell short of expectations.
With the global economy seemingly on a one-way path — possibly all the way to a recession — central banks stepped in again with interest-rate cuts and other stimuli. For some, restarting the pumps meant reversing the hikes of last year, while others who had not even begun tightening saw those dreams dashed.
Manufacturing was at the heart of the slowdown and that put a deep scar on trade, which has dropped sharply back from solid growth two years ago. According to one measure, the CPB World Trade Monitor, trade has been shrinking year-on-year since early summer. DHL International GmbH, which should know a thing or two about trade, sees the weakness sticking around into next year.
Through it all, stock markets have continued to hit high after a high and employment figures are still doing well, particularly in the US.
For their part, consumers kept spending, helping to offset weaker investment and largely insulate the world’s biggest economy from the global slowdown.
While monthly job gains have slowed, the unemployment rate has settled at the lowest level since late 1969 and labor market tightness is slowly paving the way for higher wages.
In Europe, the once-mighty German engine sputtered under the weight of weaker global demand and upheaval in the auto industry, creating a slump that dragged on the region.
While sentiment measures have improved recently, the outlook is for the economy to hobble along rather than enjoy a rebound.
Asia’s story was similar to Europe’s in some respects, a mix of global weakness and industry-specific troubles. Instead of cars, it was semiconductors that compounded the problem for countries like Taiwan and South Korea, although some recent figures suggest an improving outlook. Added to all that was the slowdown in China, which had repercussions across the region.
As for the growth outlook for next year, there are signs of stabilization, which is good if you want to take an optimistic view.
However, it looks like the world has moved into a slower phase of expansion for the time being.
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