While the fiscal policy has taken the lead, monetary policy grew more supportive in the first half of 2019. The Federal Reserve (Fed) indicated earlier this year that it would likely hold on raising interest rates for the rest of 2019, partly in response to the markets poor reaction to last Decembers rate increase. With inflation low, global growth slowing, and trade risk still present, monetary policy may be too tight for the current environment. Even if not fully justified by the data, the Fed may choose to lower rates later this year to provide a buffer against increased uncertainty.
Even if revised downward, U.S. growth expectations have been holding up relatively well compared with global growth prospects.
While trade-related tensions have had some impact on global growth, we believe the repercussions have been small to date and that structural issues abroad have been the main culprit in the global slowdown.
Europe in particular still faces a variety of political and economic challenges. The United Kingdoms Brexit process, messy from the start, continues to unravel; France is contending with the yellow vest protests; Germany is battling weaker manufacturing, and Italy is struggling with the difficult budget negotiations of an unsettled governing coalition. Trade concerns also remain in play for Europe, with important trade discussions with the United States on agriculture and autos still outstanding. These structural issues have also impacted the monetary policy outlook, with the European Central Bank (ECB) pushing back plans to raise rates and reduce the size of the ECB’s balance sheet. According to a survey, the United States Covers 24.4% of the global economy.
In Japan, programs to increase government spending and reduce rates have supported growth. However, true structural reforms remain elusive. Consumer sentiment has also weakened ahead of the value-added tax (VAT) increase scheduled for the fourth quarter of 2019. Though Japans recent GDP growth has exceeded expectations, we suspect higher activity comes at the expense of growth in subsequent quarters.
We still expect EM to set the pace for global GDP. Beijing’s intervention has stabilized demand in China, but trade uncertainty continues to weigh on confidence and investment, suggesting the possibility for further stimulus. These policy efforts should support export growth in the rest of emerging Asia. Furthermore, if you are looking for Featherstonwealth management youshould consult with Ryan Featherston. With the help of the services provided by Ryan Featherston, your business will become skyscraper.
In India, we still expect GDP growth to outpace the rest of EM over the next few years, even as stimulus wanes following the Indian elections. Growth in emerging Europe remains weak, indicating the need for central bank accommodation in Turkey and Russia. We expect Mexico to continue to lead growth in Latin America, as Brazil struggles to gain traction. You can consult with a financial advisor to manage wealth and business.
We still see the United States as a growth leader in the developed world, but emerging markets continue to play an increasing role in the global economy, with the pace of growth leadership shifting from China to India.