60 seconds on the world economy
In this video Keith Wade discusses his view on the world economy.
We believe that global activity will probably slow down quite a bit in coming months. We’ve seen a very sharp fall in industrial metals prices and that’s often a good signal that industrial activity is going to slow. In addition to that, we believe that the Chinese economy is slowing down, and quite a bit more than the GDP figures suggest. The third factor is the strength of the US dollar which tends to tighten financial conditions around the world and that will also weigh on growth.
Effectively, we’re saying the real impact of the tariffs that went on in June and July are going to impact global trade activity in the next few months. China is responding to this by easing monetary policy; it’s cutting interest rates and it’s also bringing in some fiscal support. We don’t think China will use its exchange rate, which would only be a last resort if they really felt that the trade wars escalated too much.
Closer to home, looking at Brexit, there’s still a lot of uncertainty despite the white paper that we had from the UK; big issues around the Irish border and also UK politics, meaning we can’t rule out a hard exit from the European Union.
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