Global growth is slower but not stalled: Fitch

A series of weak economic data releases indicates that the global economic growth outlook is dimmer than previously thought, but the forecast is not yet dark, suggests a new report from Fitch Ratings Inc.

A recent string of weak economic reports, including gloomier sentiment in the manufacturing sector in various regions, is intensifying concern about a major downturn in global growth, the credit-rating agency says. However, Fitch believes that the underlying outlook “has been dented […] but not dismantled.”

Overall, expectations for above-trend growth in the U.S., and that policy easing will underpin growth in China, “still look intact,” the report says. The outlook for Europe has weakened more significantly, though.

Several temporary factors, such as disruptions to the automobile industry due to new emissions standards, weather-related issues and social protests in France, “have likely played a part in weak eurozone activity,” the report notes.

That said, the report points out that “the slowdown in world trade and fading credit impulse now look likely to see eurozone growth heading back down toward potential (estimated to be below 1.5%) more quickly than previously expected. The possibility of a no-deal Brexit adds further downside risks.”

For the U.S., even though manufacturing indicators have deteriorated, “private-sector demand still looks robust,” the report says.

“Strong job gains and rising nominal and real wage growth continue to support the consumer, and lead indicators of business investment suggest prospects are still for decent growth in 2019, albeit at a slower rate than in 2018,” the report notes, adding that the U.S. Federal Reserve Board “now looks likely to raise rates in 2019 by less than the three hikes” it previously predicted.

Staff

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