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The Research Department at BBVA points out global growth slowed markedly during the second quarter, with weakening signs stemming from China and the Eurozone. They see Increasing trade tensions and higher uncertainty weighing on trade and the industrial sector.  

Key Quotes:  

“Global growth slowed markedly in 2Q19, in line with expectations, with weakening signs stemming from China and the Eurozone, especially after the slight contraction in German GDP. Increasing trade tensions and higher uncertainty are weighing on global trade and the industrial sector, but are also reflected in investment and slowing domestic demand.”

“Our BBVA-GAIN model suggests that weaker momentum extends into 3Q19 with global GDP growth at around an annualized rate of 2.8% (from around 3.5% on average in 2016-18).

Disappointing hard data up to July: The trade war escalation and higher uncertainty are weighing on the worsening of global exports and on the protracted weakness of the industrial sector across the board. The deterioration of the industrial sector is more marked in the Eurozone, but it is also affecting the US and China. Beyond volatility, the strong fall of retail sales in July suggests that domestic demand could be losing momentum across regions.  

“Leading confidence indicators in 3Q19 point to a gloomier outlook in coming quarters, especially in manufacturing, but declining services PMIs increase concerns about spillover effects from exports to domestic factors, especially in the Eurozone and China.”