20181212-招银国际-Global_Economy_Monthly_Update__Recap_of_Recent_Events_and_Outlook_for_2019_8页_1mb

Global Economy Monthly Update Summary (December 2018)

Core Content Overview

This report provides a detailed analysis of the global economic outlook for 2019, focusing on the United States, the Euro Area, the United Kingdom, Japan, and Hong Kong. It highlights the risks and challenges each region faces, including trade tensions, monetary policy adjustments, and domestic political uncertainties. The report also includes economic forecasts and insights into market dynamics.

Main Points and Key Information

Global Economic Outlook

• Global Growth Slowdown: The synchronized growth observed since 2017 is expected to fade, with global real GDP growth projected at 3.2% for 2019, down from 3.4% in 2018.
• Trade Tensions as Downside Risk: Trade conflicts, especially between the US and China, are identified as the biggest risk to global growth.
• Central Bank Tightening: Central banks are expected to continue tightening monetary policies, which could affect emerging markets (EMs) through reduced external pressures.

United States

• G20 Ceasefire: A temporary truce between the US and China at the G20 summit was driven by the economic and market costs of the prolonged trade war.
• Economic Peak: The US economy is expected to peak in 2019, with growth slowing from 3.0% in 2018 to 2.5% in 2019.
• Private Consumption as Support: Private consumption is the main driver of growth in the first half of 2019.
• Second Half Challenges: Growth is likely to weaken in the second half due to multiple headwinds, including trade policy uncertainty and rising interest rates.
• Housing Market Decline: Mortgage rates have risen due to Fed rate hikes, leading to a decline in housing sales and price growth.
• Yield Curve Flattening: The yield curve has flattened, increasing the probability of a recession, though not in the near term.
• Job Growth and Inflation: Job growth has slowed, but the labor market remains tight. Inflation is expected to stay moderate, with CPI at 2.3% and core PCE at 2.1% for 2019.
• Fed Policy: The Fed is expected to raise rates twice in 2019, but the pace remains uncertain due to trade tensions.

Euro Area

• Economic Deterioration: The Euro Area is experiencing a slowdown, with GDP growth expected at 1.6–1.8% in 2019, down from 2.0% in 2018.
• Italy's Budget Crisis: Italy's willingness to amend its budget to avoid a fiscal dispute with the EU still carries risks for the economy and EU financial stability.
• French Protests: The "yellow vest" protests in France are expected to hurt economic activity in the fourth quarter of 2018.
• ECB Dovish Shift: The ECB is expected to turn dovish, potentially keeping interest rates on hold in 2019.
• Downside Risks: Brexit, Italian budget issues, and global trade tensions are the main risks for the Euro Area.

United Kingdom

• Brexit Uncertainty: The UK faces significant challenges due to Brexit negotiations and domestic political turmoil.
• GDP Impact: A no-deal Brexit could reduce GDP by 9.3%, while a deal is expected to result in 1.2–1.4% growth.
• Political Delays: The parliamentary vote on Brexit was postponed, increasing the likelihood of a no-deal outcome.
• Economic Consequences: Consumer confidence and service sector performance have weakened, with the service PMI dropping to 50.4 in November.
• Currency Volatility: A no-deal Brexit could lead to a sharp decline in the British Pound, affecting monetary policy.

Japan

• GDP Contraction in 3Q18: Japan's economy shrank in the third quarter of 2018, primarily due to natural disasters.
• Rebound Expected: Economic activity is expected to rebound in 4Q18, with GDP growth forecast at 0.8–1.0% for 2019.
• Export Slowdown: Real exports are expected to continue slowing, with inflation still below the core target.
• Monetary Policy: The Bank of Japan is expected to maintain ultra-easy monetary policies in 2019.

Hong Kong

• Economic Slowdown: Hong Kong's economy is expected to grow at a sharply slower pace in 2019, at 2.6%, due to external risks and global economic slowdown.
• Retail and Trade Rebound: Retail sales and external trade both rebounded in October, but the effects of the trade war will become more evident in 2019.
• Housing Market Correction: House prices continue to decline, with a potential 10% drop in 2019. Mortgage rates and economic outlook are contributing factors.
• Inflation Stabilization: Composite CPI stabilized in October at 2.7%, with underlying inflation at 3.0%.
• Banking Resilience: The banking system is expected to remain resilient despite multiple risks.

Key Economic Indicators (2017A–2019E)

Conclusion

The global economy is expected to slow in 2019, with trade tensions, monetary tightening, and domestic political uncertainties being key risks. While the US economy remains strong in the first half, it is expected to weaken in the second half. The Euro Area and UK face more pronounced economic challenges, with the UK's Brexit outcome being a major determinant of its path. Japan is expected to recover from its third-quarter contraction, but export weakness and inflation concerns will persist. Hong Kong's economy is projected to grow at a slower pace, with housing market correction and external risks playing a significant role.