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Economics Commentary

Global Macro Outlook - March 2019

18 March 2019
1 min read

What You Need to Know

Our experienced global team of economists offers its latest perspective on the world economy. Included are regional and country forecasts for growth, inflation and interest rates, updates on central bank and fiscal policies, and the upside and downside risks that could change the trajectory.

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Key Forecast Trends

  • Four questions have shaped the macro debate this year: Would the Fed continue tightening? Would China's stimulus be timely and effective? Could trade tensions ease? Could Europe slip into recession?
  • Other than Europe, where we're hopeful but the jury's still out, these questions have largely been resolved. The Fed has become more data dependent, China has increased the pace of stimulus and the trade dispute has de-escalated. The result has been a major rally in risk assets.
  • Still, there's reason to be cautious. Global trade continues to decelerate, a reminder that a trade deal will not be a panacea. And it's not clear that slower growth will generate the sort of excess capacity that would relieve emerging inflation pressures.
  • Moreover, even resolution of the US-China trade war could prove a double-edged sword if Chinese concessions encourage the US to get tougher in trade negotiations with Europe.

Outlook

  • We have not changed our 2019 global growth forecast of 2.7%—a material downgrade from our global growth forecast of 3.1% just a few months ago.
  • Compared to consensus, we are a bit more pessimistic on the euro area (1.1% versus 1.4%) and the US (2.0% versus 2.5%), in line on China (6.2%) and mildly optimistic on Japan (1.1% versus 0.8%).
  • We expect global inflation to fall to 2.7% this year from 2.9% in 2018, largely because of the lower starting price for oil.
  • While slowing growth represents a downside risk to inflation, high capacity utilization rates and rising wage growth point in the opposite direction. We don't expect a sharp deceleration of core inflation pressures.

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