Global economic growth is slowing down, next week’s numbers could show.
In the eurozone, flash purchasing managers’ surveys on Monday could show a drop in manufacturing growth to its slowest rate for 14 months, while services growth could fall to a 10-month low. This could be corroborated by the National Bank of Belgium, which could report a fall in business confidence to a seven-month low, and by Germany’s Ifo survey, which is likely to show both a cooling in manufacturing growth and a decline in business confidence, exacerbated perhaps by fears of a trade war.
We might also see weaker growth in the US. Official figures on Friday could show that real GDP growth fell to an annual rate of around 2 per cent in the first quarter, after 2.9 per cent growth in the fourth quarter of last year. Figures on sales of both new and existing houses would be consistent with this. Both are likely to show a slowdown in growth in recent months.
UK growth might also be slowing. The ONS could report on Friday that GDP growth slowed from 0.4 to 0.3 per cent in the first quarter: the figures are, however, prone to revision.
This would be partly due to March’s bad weather depressing both construction and retail sales: the CBI should report a recovery in the latter in April. There are, however, more fundamental reasons to expect slow growth. The CBI might draw attention to these on Tuesday. Its quarterly survey could show a dip in export orders and output expectations because of the slowdown overseas. And investment intentions might stay weak, in part because uncertainty about Brexit is offsetting high capacity utilisation.
For now, none of this is cause for great alarm. The slowdown in Europe comes from a high rate: the levels of purchasing managers’ indices will remain high, as indeed will UK manufacturers export order books and output expectations. And in the US Tuesday’s report from the Conference Board will show that consumer confidence, while down from February’s highs, remains close to an 18-year high.
Nevertheless, it could be that global growth has already peaked even though interest rates are still very low by historic standards. This is consistent with the theory of secular stagnation – that the world economy has shifted down to a much lower trend rate of growth than we saw in the 1980s and 1990s.
