GECS Q4 2019 cover image

 

The Global Economic Conditions Survey (GECS) global confidence index bounced in Q4, back to around its level in mid-2019. Meanwhile, the less volatile global orders balance was little changed for the third quarter in a row. Global investment intentions recovered modestly this quarter and employment was little changed. The message from the GECS is steady growth early in 2020, but with no significant revival after the slowdown last year. Downside risks persist, notably in relation to US-China trade tensions but a global recession is not likely, given the continued resilience of consumer spending and the lagged effect of last year’s monetary easing. 

US orders perk up a little  

Confidence in the US recovered strongly, to the highest since 2018 Q2. In addition, the orders balance improved for the first time since 2018 Q2, to a level consistent with GDP growth at an annualised rate of around 1.5% in the first half of 2020. Last year’s ¾ percentage point cut in interest rates is supporting growth, notably through the housing market. Trade tensions with China have eased lately but this area remains a potential downside risk.

Sluggish growth in Western Europe to continue

Through last year, GECS pointed to soft growth in the UK and euro-zone. The former was dogged by Brexit uncertainty and the latter (especially Germany) by slowing global trade. Confidence in the region bounced in Q4 but orders slipped further, suggesting annual GDP growth rates of around 1% in both the UK and euro-zone early this year.      

Asia Pacific in the shadow of China’s slowdown

Confidence in the Asia Pacific region improved but by less than the global average in Q4. The region is exposed to the slowdown in global trade and a faltering Chinese economy, but several economies in the region offset these headwinds and boosted domestic demand through monetary and fiscal easing.   

Indian growth outlook remains weak     

Annual GDP growth in India has slowed to a six-year low of 4.5%, it’s one of the biggest downside surprises of 2019 and caused in large part by a credit squeeze. The GECS confidence index improved in Q4 but is significantly lower than a year ago, which is consistent with well below-trend growth early this year.  

Middle East confidence recovers but geopolitical risks return

Oil prices rose over the quarter and confidence in the region also recovered. Steady global GDP growth this year may contribute to relatively stable oil prices. Geopolitical risks may be a significant influence in the coming months, although potential spill-overs to the wider global economy are likely to be limited.

ACCA author, Michael Taylor