Signs of global rebound are appearing

Recent data suggest the downturn in the world economy is bottoming out after a prolonged period of deterioration. We expect the world economy to expand by 3.3% this year.

At its Spring Meeting, the International Monetary Fund (IMF) revised downward its 2019 global growth forecast from 3.5% to 3.3% (the same as our own forecast). The IMF left its estimate for 2020 growth unchanged at 3.6%

As global growth probably slowed to 3.2% in the second half of 2018, a 3.3% growth estimate for 2019 implies that growth stabilises in H1 and firms up in H2. The latest news on global activity tends to confirm that the global economy is indeed beginning to regain momentum.

For example, the global purchasing manager index (PMI) for manufacturing stabilised in March after 10 months of deterioration in a row. And after a 15% collapse last year, global car registrations showed a heartening rebound at the beginning of this year, notably in advanced economies. This rebound should support industrial activity.

Furthermore, our leading indicator for international trade continues to weaken but remains in positive territory (+1.3% y-o-y in March), suggesting that the recent contraction in trade could prove to be temporary. Iron ore exports, which generally provide pointers for international trade, bounced back in March after four months of negative growth.

Relaxed global financial conditions may lead to an improvement in manufacturing sentiment as the year progresses. Improving conditions should also help world real GDP growth to stabilise close to current levels, meaning a global recession is avoided.

All these indicators tend to support our belief that 3.3% world real GDP growth is achievable in 2019.

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