The economies of the US and China showed welcome signs of stabilization, although not enough for global central bankers to declare the all clear about the outlook.
Here’s our weekly wrap of what’s going on in the world economy.
Tapping the brakes
It’s a tapping, not a pumping, of the brakes globally as more economies feel some relief on the back of less gloomy China data. Better-than-expected first-quarter growth and a surge in credit are the latest signs that the world’s No. 2 is at least on the mend after a rough start to the year. There’s still a mood of caution, especially coming out of semi-annual IMF-World Bank meetings, where global finance chiefs were reluctant to chart a big rebound. And it’s especially the story in Europe, where the continent’s growth engine has slashed its growth forecast. Worse yet are crisis economies like Brazil that only seem to be getting worse. Venezuela claims the title of world’s most miserable economy for a fifth year.
The US had been the resilient one and retail sales for March beat forecasts, signaling consumers are giving the economy greater support. But one big negative risk for the year is building: bulging trade-war era stockpiles weigh on growth.
While both sides look to nail down an actual date for a real deal, China was more the victor this week in the trade war, emboldened by stronger economic growth. The US was more on the defense, with much of the rest of the world blaming it for meek demand. (India’s not complaining, since there are signs it’s enjoying a shift in Chinese orders away from the US) Domestic pressures are building, with the US trying to convince China to weigh a request to shift tariffs off embattled American farmers. And Toyota compared potential auto tariffs to pulling the pin out of a grenade.
The US can look forward to more deal-making leverage in its burgeoning talks with Japan, which is more vulnerable after weak exports reported this week. The data on our Trade Tracker show that global trade is finally showing signs of healing, even if it’s too early to bet on its durability.
China’s central bank is pledging not to flood the economy with excessive liquidity as the policy makers try to achieve a soft landing. The Bank of Korea kept policy unchanged this week, the Bundesbank is tracking soft German growth, and in Canada, the talk is also about keeping things on hold to await more clarity in the data.
With less movement in interest rates, central bankers might be more consumed with whatever happened to inflation, anyway. And they’re still on guard against threats to independence, with Mario Draghi noting his concern in a rare commentary of outside policy-making. President Donald Trump doubled down against the Fed, charging that their policies have robbed the stock market of as much as 10 000 points.
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