Janet Mui: 2019 third quarter update
In two years the global economy has gone from synchronised growth to synchronised slowdown. Our stance has become more cautious, but we do not expect a recession
- Two years ago the majority of the world economy was growing. Today the reverse is true as economies come together in a synchronised slowdown.
- Weakness is focused on manufacturing, and triggered by the ongoing trade dispute between the US and China.
- Despite the slowdown we do not expect a recession. This is because the spillover from manufacturing weakness into the services sector is so far relatively contained. In the US, the services sector is a far greater part of the overall economy than manufacturing.
- US consumers are in a comparatively robust position: they are helped by lower levels of household debt and lower interest costs.
- Central banks including the Federal Reserve have been cutting rates to support the global economy, but their ammunition is limited.
- The key topic in financial markets is whether governments will ride to the rescue with supportive fiscal policies. Again, in many developed markets, governments' headroom for fiscal action is limited.