Macroscope | US-China trade war and Trump impeachment inquiry are weighing on the global economy, but fears of a recession are unfounded
- Wherever one looks, it seems like all the market news is downbeat, but a recession in the US remains less likely than many believe
- Moreover, with the 2020 presidential election looming, Donald Trump may have good reason to de-escalate his trade conflict with China
Investors would have been hard-pressed to find something positive to latch onto in the Organisation for Economic Cooperation and Development’s latest economic outlook, published last week.
Titled “Warning: low growth ahead”, the report noted that the “global outlook has become increasingly fragile and uncertain” due to “escalating trade policy tensions”, with growth in 2019 and 2020 “revised down in almost all G20 economies” and set to slow to its weakest pace since the 2008 financial crisis.
On Monday, preliminary survey data compiled by IHS Markit showed that the euro-zone economy almost stalled this month, with a recession in the manufacturing industry starting to take its toll on the once-resilient services sector.
Germany, Europe’s largest economy, experienced the sharpest contraction in manufacturing output since 2009. IHS described the figures as “simply awful”.
What is more, China’s economy, which is far and away the biggest contributor to global growth, continued to weaken as the government eschewed heavy-handed stimulus.