Global Economic Outlook November 2018

Global economic growth appears to have lost steam in the third quarter in annual terms following Q2’s strong showing. A preliminary GDP estimate for the global economy put year-on year growth at 3.3% for Q3. While the print was a notch below the 3.4% increase from the previous period, it matched last month’s forecast.
The softer Q3 reading was driven in part by weaker dynamics in global powerhouse China, which saw growth fall short of expectations according to recent figures, amid rising trade disputes with the U.S. and subdued industrial production and investment. In order to shore up flagging activity, the Chinese authorities have loosened credit conditions, relaxed anti-pollution measures and unveiled plans to reduce taxes in recent weeks, with the impact of changes likely to be felt from Q4 onwards. Moreover, growth in the Eurozone likely dimmed in annual terms, despite remaining robust, due to a tough base effect arising from a stellar performance in 2017. In contrast, monthly indicators suggest the U.S. economy continued to roar ahead in the third quarter, buoyed by fiscal stimulus measures, low unemployment and elevated consumer confidence. The UK economy also appeared to perform well, although this was at least partly due to warm weather buoying consumer spending, and momentum is set to ebb in Q4.

Regarding emerging markets, economic dynamics in ASEAN and East and South Asia should have stayed robust, supported by solid domestic demand and strong labor markets. Most economies in Eastern Europe likely also chalked up healthy growth—buoyed by strong demand from the EU—although a rapid deterioration of economic conditions in Turkey dragged on the region’s performance. Economic activity in Latin America continued to be held back by political and financial instability in key economies such as Argentina, Brazil and Venezuela, while the Middle East and North Africa, and Sub-Saharan Africa regions should have benefited from higher prices for their key commodity exports.