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According to analysts at ABN AMRO, the global economy has slowed markedly since early 2018 and their outlook is for continued sluggish, below-trend growth but no recession.

Key Quotes

“What would make me more optimistic is a reasonably convincing deal between the US and China and evidence that business confidence is responding positively to that. That is certainly a possibility, but we have been hopeful in the past only to be disappointed eventually. Bar a US-China deal, we cannot see what should make us much more optimistic.”

“On the other hand, we do not think a (US) recession is imminent. US consumers are simply too strong. It usually requires consumers to throw in the towel to push the US economy into a recession. But unemployment is very low, income gains reasonable, the savings rate high and the debt service ratio very low. No wonder consumer confidence is high. While we expect things to deteriorate as slower investment spending growth will have an impact on the labour market that will take a while.”

“Meanwhile, the Fed has eased twice and may ease more. Hawkish critics argue that the Fed’s actions are premature and that they should not be easing when unemployment is at record lows.”

“There wasn’t much important data out in recent days. Industrial production rose 0.3% mom in Germany in August after falling 0.4% in July. The yoy rate deteriorated from -3.9% to -4.0%. Industrial orders in Germany fell again in August, by 0.6% mom. The yoy rate deteriorated from -5.6% in July to -6.7%. This is pretty dire.”

“French industrial performance has been more positive than Germany’s in recent months. However, August was a poor month for France. Industrial production fell 0.9% mom and 1.4% yoy. This is still better than Germany but it is heading in the same direction.”