With further deterioration in the global manufacturing Purchasing Manager's Index (PMI) to 50.7 in January, the global economy is flirting with recession.

January’s deterioration in sentiment was widespread, with the notable exception of the US. However, it is possible that January pessimism was largely caused by December’s poor financial markets. If this is indeed the case, it is likely that we will see a bounce in sentiment in the months ahead, following January’s rebound in markets.

The latest global activity hard data were also poor. International trade contracted in November in large part due to a marked deterioration in Asian trade, which had recently been the last remaining pillar of trade expansion.

The trade dispute first knocked sentiment but is now also progressively impacting hard data. Positive developments in negotiations between the US and China are therefore key if a global recession is to be avoided in 2019.

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