Global economics in The Monday Briefing
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Today’s Briefing summarises the findings of the latest Deloitte Survey of Chief Financial Officers which was released overnight. The full report is available at: https://www2.deloitte.com/uk/en/pages/finance/articles/deloitte-cfo-survey.html
There’s no doubt that growth in the West is slowing. The question is whether the slowdown could turn into a recession. Last month the US yield curve, a key gauge of future US growth, temporarily dipped into recessionary territory for the first time in ten years.
China’s economic transformation in the last four decades is one of the great economic success stories of modern history. Through liberalisation and opening up to trade China was able to grow by 10% a year between 1980 and 2018. Its economy expanded by a factor of 30 and it easily dodged recession during the global financial crisis. There is no precedent in history for an economy of this size growing at such a rate for so long.
This morning we are launching our quarterly “Global Economy in Charts” report, a 20-page slide deck, available here. Created by my colleague Debo, the report examines the big global macro trends and challenges. Charts can be cut and pasted into your own reports. Do drop Debo a line at email@example.com with ideas and comments.
We were taken by surprise last week by the scale of the downgrade to the OECD’s latest forecast for German growth. The OECD now thinks that the German economy will grow by just 0.7% in 2019. This is a big reversal of fortune; a year ago the thinking among economists was that Germany would grow by around 2.0%. At 0.7% German growth would be slower than the euro area as a whole (1.0%) and even the Brexit-embattled UK (0.8%).
Last October the International Monetary Fund warned of the risk of another global financial crisis. The Fund sees a 60% rise in global indebtedness in the last ten years and the exposure of banks to illiquid assets as major risks.
2018 was a tough year for British retailers. According to the Centre for Retail Research, nearly 2,600 stores closed, the highest number since 2012. Recent high-profile casualties included HMV, Patisserie Valerie and Oddbins. Along with the structural shift to online shopping, high-street retailers are under pressure from a slowdown in consumer spending growth.
After a dreadful end to the year global equity markets got off to a flying start in 2019. The US S&P 500 index is up by 10% so far this year, having fallen by 16% in the first three weeks of December.
The financial crisis of 2008-09 pitched Western economies on to a lower growth path. In recent years growth across the industrialised world has run well below the rates seen in the years before the financial crisis.