Opinion | When the next recession hits, central banks in the US, Japan and Europe simply won’t have the tools to fight it

It was only in January that the International Monetary Fund was trumpeting “the broadest synchronised global growth upsurge since 2010”, accentuating the “upside surprises in Europe”.

To be sure, the global economy is still chugging along at a solid pace. In its latest outlook published at the end of last month, the Organisation for Economic Cooperation and Development forecast that growth would reach nearly 4 per cent this year and next, with America’s economy growing nearly 3 per cent. Yet while the OECD’s gross domestic product forecasts may be upbeat, it tellingly titled its outlook “Stronger growth, but risks loom large”.

One of these vulnerabilities is the sudden end to the period of synchronised growth. The “upside surprise” in the euro zone has been supplanted by a marked slowdown in the past several months. IHS Markit, a data provider that produces monthly purchasing managers’ index surveys, notes that Europe’s single currency area is likely to have just suffered its worst quarter since 2016, with the deceleration proving broad-based.

Other cracks in the global growth story are starting to show. The dramatic escalation in tensions over international trade is contributing to weakness in Germany’s export-led economy, where investor confidence has sunk to its lowest level since 2012, and threatens to exacerbate the recent slowdown in China where industrial output, retail sales and investment all rose less than expected in May.