Downward Pressure on Global Economy Has Softened

The ongoing downbeat news on the global economy has left many supply chain managers uneasy of late, particularly those seeking to mitigate modal costs.

But along with the fragile cessation of trade hostilities between China and the United States, the Trump administration has signaled that it may delay the threatened tariffs on Europe's automotive exports.

Additionally, the risk of a no-deal Brexit seems to have diminished a little. Equally important, the stimulus provided by central banks is beginning to filter through to easier financial conditions.

Meanwhile, U.S. equity markets have touched new records and bond yields have risen, signaling reduced fears of an imminent recession. All these trends have been reflected in the stabilization of IHS Markit purchasing managers' indexes (PMIs) in global manufacturing industries.

“Nevertheless, the risks facing the global economy remain elevated,” says IHS Markit's Chief Economist, Nariman Behravesh in the firm's “November Global Economic Forecast.”

“In particular, the trade tensions have not been resolved and hostilities could flare up again, threatening growth anew.”
Thus, global real GDP growth is projected to slow from 3.2% in 2018 to 2.6% this year and 2.5% in 2020.

Sara Johnson, Executive Director, Global Economics, for IHS Markit, concurs:

“For the moment, the growth outlook seems to have stabilized, but a lot will depend on what policymakers in the United States, China, Europe, and Japan do next.”

The forecast finally notes that “special factors” support growth in 2020.

Third-quarter real GDP growth was reported at a 1.9% annual rate in the U.S. Commerce Department's advance estimate. Unanticipated strength in final sales to domestic purchasers and in net exports was partially offset by weaker-than-expected inventory accumulation.

Recent data on consumer spending and business fixed investment were on the soft side, though, and the United Auto Workers' strike against General Motors lasted six weeks instead of the three weeks economists expected last month.
As a consequence, IHS Markit has marked down their forecast for fourth-quarter growth to 1.5%.

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