Spreading slowdown from industry to services points to ongoing weak global growth – ABN AMRO

Nick Kounis, the head of financial markets research at ABN AMRO, suggests that recent economic data confirm that the slowdown in the global economy will be more protracted with global trade and industry likely to remain weak over the next few months.

• “We attribute the slowdown in trade and industry to the past tightening of monetary policy – led by the US and China – as well as a confidence shock related to the ongoing trade conflict, which has caused a slump in capital spending.
• Neither of these factors looks set to reverse quickly. Although the Chinese authorities have been easing monetary and fiscal policy, it remains piecemeal, reflecting their longer-term goals of keeping overall leverage in check. At the same time, the Fed – focused on domestic economic conditions – has judged that there is a need for only modest insurance rate cuts. Meanwhile, uncertainty related to the trade conflict looks set to persist, with no comprehensive deal in sight, despite this week’s US-China talks.
• Recent data also suggest that the sharp downturn in trade and industrial production has started to spill-over into domestic demand and the services sector. In particular, service sector surveys in the US and eurozone saw significant falls in September, while there has been softening in labour markets in both cases as well. This process is likely to continue, leading to some slowdown in advanced economy consumer demand in the coming months.”