Economic Commentary – Sept 2019

September 9th, 2019, by Chris Davis

There may be trouble ahead

Traditionally the summer months have little economic and political news flow, not so in 2019. As Hurricane Dorian heads towards mainland US, markets are increasingly becoming more volatile as economic data weakens, geopolitical risks intensify and global trade deteriorates.

As a consequence the growth outlook for the global economy has slowed. In July the International Monetary Fund cut its forecast for global growth, since then the relationship between US and China has deteriorated; the probability of the UK leaving the EU without an agreement has increased; a dispute in trade between Japan and South Korea has started; the Iran-US relations have deteriorated; Hong Kong is in crisis; and Argentina is in meltdown. There is much to worry about in the world as global trade and supply chains that have been developed over the last 70 years are adapted to new scenarios. Whether the global economy slows further will depend upon the willingness of political leaders to adjust their current fiscal and trade strategies.

The continued geopolitical uncertainty and protectionist policies have affected the manufacturing sector with services and consumer spending currently bolstering the global economy. In general the consumer, experiencing high employment, rising income and tepid inflation, appears resilient. As governments around the world have shown an inability or hesitancy to increase fiscal stimulus, it falls to the Central Banks to try to prolong the economic expansion.

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