Few economists foresee an outright global recession within the next year. But the synchronized growth that powered most major economies since 2017 appears to be fading. The risks have been magnified by the trade war raging between
It’s all been enough to contribute to a broad retreat in global stock markets. Counting Tuesday’s deep losses,
The Fed is expected next month to raise its key short-term rate for the fourth time this year. The central bank’s rate hikes help control inflation. But they also make loans costlier for consumers and businesses. And for countries that borrowed in
“We can’t continue to grow this fast for much longer without risking inflation,” Adrian Cooper, chief executive of Oxford Economics, said of the still-solid
The concerns have grown enough that Larry Kudlow, President Donald Trump’s top economic adviser, on Tuesday dismissed the worries roiling the markets.
“Recession is so far in the distance I can’t see it,” Kudlow told a group of reporters outside the White House. “Keep the faith. It’s a very strong economy.”
The collective growth of the world’s major economies in the past two years was broadly welcomed after a feeble recovery from the 2008 financial crises. Yet few economists saw accelerated growth as sustainable — or even desirable — over several years.
The concern is that a prolonged global expansion could ignite inflation or speculative investing that would inevitably send vulnerable economies into a downturn. Compounding the challenge, the world’s economies are linked more than ever through trade, finance and investment — to the point that a rupture in one major nation tends to spread across the globe.
Oxford Economics predicts that the growth of the global economy, as measured by its gross domestic product, will slip from 3.1 percent this year to 2.8 in 2019. Such a slowdown is enough to crimp corporate profits and business investment, Cooper said. Still, most American and European workers probably wouldn’t feel the pain, he said, in part because of a resilient job market and lower oil prices.
“2019 is still going to look pretty good — your job is going to be safe, and your wages are going to rise,” Cooper predicted while adding that he thinks the slowdown will worsen in 2020.
In the meantime, though, stock markets have endured waves of jittery selling as investors have tried to factor in a slowdown that could depress the growth of company profits.
“Financial markets have become a little more volatile and anxious of late, worried about slowing global growth, trade tensions, Brexit woes and concerns that the
Over the next two years, most forecasts suggest that
“You see signs of a gradual slowdown,” Powell said.
Goldman Sachs foresees annual
One continuing threat for the
A prolonged trade crisis would depress the global exchange of goods and, therefore, economic growth. Trump is set to meet with President Xi Jinping at a Group of 20 international meeting in
“Both countries appear to be far apart on the trade dispute and unwilling to back down at this point,” said Scott Anderson, chief economist at the Bank of the West.
Similarly, political ruptures threaten to slow the pace of
Yet the biggest risk of all might be
Among companies and economists, the question isn’t whether Chinese growth will slow further; it’s how much. In September, year-over-year economic growth reached a post-global crisis low of 6.5 percent. This followed a regulatory clamp-down on bank lending to curb surging debt. Forecasters expect the decline to deepen at least through mid-2019.
The ruling Communist Party wants slower, more self-sustaining growth driven more by consumer spending and less by trade and investment. But the slump has been sharper than expected. In response,
October auto sales fell 13 percent from a year ago, putting vehicle sales in
“Further action” is needed to “put a floor beneath economic growth,” Julian Evans-Pritchard of Capital Economics said in a report.
Finding that floor could prove problematic if the trade war with the Trump administration diminishes the exports that propelled
“In this environment, contagion in global markets could not be avoided,” UBS analysts wrote.
McDonald contributed from