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The Global Economic Conditions Survey (GECS) global confidence index fell to its lowest level in almost eight years in the third quarter of 2019. Confidence across regions has converged at low levels. Orders were steady in the latest quarter, but were also at the lowest in over three years.

The message from the GECS is that the global economy will continue to lose momentum into 2020. Inflation concerns continue to diminish in the latest survey and this benign inflation backdrop is allowing central banks to ease monetary policy.  

US orders point to slowdown – no recession 

Confidence in the US increased slightly, but remains at a low level. Orders fell further and are consistent with GDP growth at an annualised rate of between 1% and 1.5% into next year. Interest rates have been cut by half a percentage point in recent months and further easing is likely by year-end. This – and continued strength in the jobs market – adds to the view that the US will avoid recession. 

Asia Pacific hurt by China slowdown

Confidence in the Asia Pacific region fell sharply in Q3, reflecting a weaker outlook as the Chinese economy continues to slow, failing to respond to rather limited stimulus measures. Some economies in the region may get some benefit from boosting exports to the US.  

Brexit uncertainty clouds UK prospects     

Confidence was stable at a low level and orders dipped in Q3. The outlook points to very weak growth for the rest of the year. Brexit uncertainty is especially harmful to business investment and the GECS capital spending index fell close to a six-year low in the latest survey. 

Geopolitical risks undermine Middle East confidence

Oil prices fell slightly between the Q2 and Q3 surveys but confidence in the region suffered a more significant drop.  Geopolitical risks in the region, focused on Iran, have heightened in recent months and this has contributed to increased pessimism. . Many economies in the region have cut interest rates in line with the US and this should help their non-oil private sectors.    

Emerging markets helped by lower US interest rates, hurt by slowing global trade

Emerging markets (EMs) in the latest GECS suffered falls in confidence generally in line with the global average. EMs benefit from lower US interest rates as it eases liquidity conditions. For those heavily export dependent, a bigger influence is the downturn in global trade.