https://www.imf.org/en/Publications/WEO/Issues/2019/07/18/WEOupdateJuly2019
World Economic Outlook, July 2019
Still Sluggish Global Growth
•Global growth remains subdued. Since the April World Economic Outlook (WEO) report, the United States further increased tariffs on certain Chinese imports and China retaliated by raising tariffs on a subset of US imports. Additional escalation was averted following the June G20 summit. Global technology supply chains were threatened by the prospect of US sanctions, Brexit-related uncertainty continued, and rising geopolitical tensions roiled energy prices.
•Against this backdrop, global growth is forecast at 3.2 percent in 2019, picking up to 3.5 percent in 2020 (0.1 percentage point lower than in the April WEO projections for both years). GDP releases so far this year, together with generally softening inflation, point to weaker-than-anticipated global activity. Investment and demand for consumer durables have been subdued across advanced and emerging market economies as firms and households continue to hold back on long-range spending. Accordingly, global trade, which is intensive in machinery and consumer durables, remains sluggish. The projected growth pickup in 2020 is precarious, presuming stabilization in currently stressed emerging market and developing economies and progress toward resolving trade policy differences.
•Risks to the forecast are mainly to the downside. They include further trade and technology tensions that dent sentiment and slow investment; a protracted increase in risk aversion that exposes the financial vulnerabilities continuing to accumulate after years of low interest rates; and mounting disinflationary pressures that increase debt service difficulties, constrain monetary policy space to counter downturns, and make adverse shocks more persistent than normal.
•Multilateral and national policy actions are vital to place global growth on a stronger footing. The pressing needs include reducing trade and technology tensions and expeditiously resolving uncertainty around trade agreements (including between the United Kingdom and the European Union and the free trade area encompassing Canada, Mexico, and the United States). Specifically, countries should not use tariffs to target bilateral trade balances or as a substitute for dialogue to pressure others for reforms. With subdued final demand and muted inflation, accommodative monetary policy is appropriate in advanced economies, and in emerging market and developing economies where expectations are anchored. Fiscal policy should balance multiple objectives: smoothing demand as needed, protecting the vulnerable, bolstering growth potential with spending that supports structural reforms, and ensuring sustainable public finances over the medium term. If growth weakens relative to the baseline, macroeconomic policies will need to turn more accommodative, depending on country circumstances. Priorities across all economies are to enhance inclusion, strengthen resilience, and address constraints on potential output growth.
In the United States, 2019 growth is expected to be 2.6 percent (0.3 percentage point higher than in the April WEO), moderating to 1.9 percent in 2020 as the fiscal stimulus unwinds. The revision to 2019 growth reflects stronger-than-anticipated first quarter performance. While the headline number was strong on the back of robust exports and inventory accumulation, domestic demand was somewhat softer than expected and imports weaker as well, in part reflecting the effect of tariffs. These developments point to slowing momentum over the rest of the year.
https://www.kiplinger.com/article/business/T019-C000-S010-gdp-growth-rate-and-forecast.html
Consumer spending surged in the second quarter to lift GDP growth to 2.0% after 3.1% growth in the first quarter. Government also contributed strongly to growth. However, business investment in equipment, inventories and structures was weak, along with housing and exports.
Consumers are carrying a heavy load. If the weakness in business spending and exports starts to affect employment, then consumers may start pulling back.
Corporate profits bounced back in the second quarter after weakness in the first quarter. That was a welcome sign that may boost business confidence a bit, though profits at domestic nonfinancial corporations have not made it back to their fourth-quarter peak level.
Growth in the second half of the year is likely to be around 2.0%, leaving growth for the year at about 2.3%. GDP growth will soften a bit again in 2020, an election year, dropping to about 1.8%. It is expected that the tax-cut stimulus will wane, and the trade deficit will again be a worry. Uncertainties about global growth may limit businesses' willingness to expand, especially as the U.S.-China trade war appears to be heating up again.
https://www.kiplinger.com/article/business/T019-C000-S010-business-spending-forecast.html
Businesses are scaling back spending on new equipment as uncertainty mounts about the outcome of the U.S.-China trade war. The two leading economies are engaged in a tit-for-tat battle that has each slapping successive rounds of penalties against the other's exports. Global growth is slowing as trade tensions ramp up, a further drag on investment plans. In the latest escalation, President Trump says he will raise the existing 25% tariff rate on $250 billion of Chinese goods to 30% on October 1. Additionally, tariffs on another $300 billion of Chinese goods, which start on September 1 for some products and December 15 for others, will now be at a rate of 15% instead of the original 10%. Overseas sales of U.S. agricultural products like soybeans have virtually dried up as China has turned to Brazil and other suppliers. And the export-reliant U.S. manufacturing sector is losing momentum, partly because aircraft maker Boeing has not yet been able to get its grounded 737 Max aircraft certified as safe to return to service.
A scant 2% rise in capital spending is in store this year, before shrinking to 1% growth in 2020. Until recently, there was reason to hope for a second-half pickup that might lift spending this year to the 5% growth range, but that no longer seems likely as the United States and China continue to impose penalties on one another that dim chances for a trade agreement — or even a cease-fire. Business spending in 2018 was up 6%, a figure that now looks robust by comparison, though it was modest by standards of recent decades, when double-digit annual increases were common. Surveys show factory business in several major regions weakening at the start of the third quarter, implying a looming falloff in shipments of finished goods that is likely to keep investment constrained in coming months.
A global slowdown in economic activity weighs heavily on companies' investment plans. Europe's outlook is deteriorating as its export markets in China soften, while China itself is experiencing a decline in exports that is putting its economy under strain. Britain continues to grapple with its planned exit from the European Union, which Prime Minister Boris Johnson insists will happen on October 31 with or without a deal in place for handling future trade relations. A no-deal exit will disrupt supply lines between Britain and the EU, potentially wreaking economic damage on both sides if shortages and logistic snarls occur as anticipated.
Posted by: sticksandstones66@yahoo.com
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