April 2019

The global economy is facing headwinds and tailwinds. The key headwind is the politics of trade and the agonisingly slow progress being made in resolving outstanding tensions. The tailwind is that labour markets are thus far still in good shape, employment growth remains robust and wage growth is nudging higher.

We are currently expecting global GDP growth of 3.4% in 2019, down on the 3.7% achieved in 2018, so we are clearly past the peak in the cycle. Growth is expected to be modestly higher in 2020 at 3.5%.

As growth has slowed, central banks have taken a dovish turn. This is most notable in the US where the Federal Reserve, the central bank that has made the most progress towards the normalisation of monetary policy, has now paused its rate hiking cycle. In Europe, the European Central Bank has only just stopped its quantitative easing programme and is already flagging a new round of cheap bank lending.