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All the risks to the global economy in one post
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Loading...The global economy shows signs of contraction in 2019, advancing fears of recession and pushing central banks around the world to maintain their passive position.
This stress causes governments to run negative forecasts for their economies. On Tuesday, the World Trade Organization cut its trade expectations for 2019 and showed data that was lowest for the past three years. The OECD cut its economic expectations last month and warned of rising risks that could lead to even worse events.
Slowdown of momentum
Regarding the trade, the shares, the currencies and the interest rates of the central banks, here are some factors that, in our opinion, remain risky for the global economy.
1. Trade
US-China Dispatch continues with full force, with no clear signal at this stage. China's economy, one of the strongest in the world, nevertheless shows signs of uncertainty, initially having negative data on shrinkage, with signs of recovery afterwards. As data for the first quarter of 2019 point to shrinkage, Bloomberg Economics's analysis gives clear signals of continuing weakness. Sentiment in German companies show signs of hope in March, despite the drop in the last six.
This pain is clearly felt in Asia, home to some of the most export-oriented businesses and economies. PMI across the continent is just beginning to reflect uncertainty.
2. Political uncertainty
Trade negotiations and tariff warfare lead to the obvious question - is the policy going to be confused with the foundations? Also in this bunch are Brexit, the many choices - some of which are quite confusing - like those in Thailand - as well as the sharp turn in the path of global monetary policy. Political uncertainty in China remains in the spotlight as analysts try to understand how the government will cope with the contraction of the economy.
In the UK, Brexit has become a burden that simply does not want to be removed, still pressing for capital and broad economic growth. According to the British Chambers of Commerce, investment activity is at the lowest level for the past 8 years.
3. Financial conditions
Financial markets seem resilient on the background of all this, although they continue to show stress signals.
Currently Bloomberg U.S. The Financial Conditions Index - which measures the overall level of financial stress in the markets (cash, bond and stock) - at least looks a little better after touching a 2½-year low in December. Positive value in this index signaled good financial conditions, while negative talk of tightening the financial picture.
4. The Power of the Dollar
Representatives of developing money are particularly keen on any permanent signs that green money will return to the consolidation path that adds great pressure and uncertainty in 2018. The dollar remains relatively stronger against the major currencies, especially when compared to their positions a year ago.
5. Economic surprises
Adding to the already bad economic dates is the fact that analysts are not particularly good at predicting lately. The reports are unpleasant - this is the last trend - especially in the US, Europe and Asia.
Even worse is the fact that economists are terrifying in predicting a coming recession.
6. Low inflation
After Jerome Powell described inflation as "one of the greatest challenges of our time," stubborn low inflation has garnered even more attention around the world. Despite unprecedented monetary support, central bankers remain unsuccessful in their attempts to accumulate stable price growth.
7. Debt
While the worries about the debt range from economy to economy, an area has gained more attention lately - including former Fed Janet Yellen President - the US leveraged loan market. UBS Group AG and Deutsche Secirities INc. commented on this risk.
Source: Bloomberg Finance L.P.
Chart: Used with permission from Bloomberg Finance L.P.
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