Global economic confidence falls again in the final quarter - but not everywhere.
All the key regions recorded a negative confidence score. Confidence increased in China and the Middle East but fell back in the US and UK. The lowest score was recorded in Western Europe and the Caribbean. South Asia, Africa and North America were once again the most confident parts of the global economies.
Confidence in the North American region fell last quarter, with declines in both the US and Canada. But while confidence in the US is at a new all-time low, Canada is only at its lowest level since Q2 in 2016. However, the GECS US orders balance remains consistent with 2% to 2.5% annualised GDP growth in the first part of 2019.
In Western Europe, confidence fell sharply and is at its lowest in seven years. The outlook in the Eurozone has weakened, although temporary negative influences in Germany and France are clouding the picture. A slowing global economy and consequent weaker export demand is a source of the euro area slowdown.
Another factor is the continued Brexit-related uncertainty. In the UK itself the GECS survey shows weaker orders and investment, illustrating the softer pace of economic activity caused by extreme Brexit uncertainty.
Confidence in South Asia has held up better than elsewhere and in India it increased significantly this quarter. This is consistent with a continued positive outlook for the Indian economy. In contrast, Pakistan is struggling with macroeconomic imbalances. And the authorities attempt to address these is likely to weigh on growth, which looks likely to slow sharply in 2019.
The GECS Asia Pacific confidence index rose slightly in Q4 but remains at a very low level. In China, confidence rebounded last quarter, for the first time in over a year but remains low. The main reason is a slowdown in credit growth and wobbles in the property sector due to previous policy tightening. But the government spending index remains in positive territory.
Fears over the impact of a trade war between the US and China, despite the recent truce, are clearly an important factor weighing on confidence.
Economic growth in Hong Kong and Singapore is slowing as weaker global trade growth feeds into lower demand for exports. Growth this year is likely to be less than 3% for both countries.
Confidence in the Middle East improved in the final quarter of the year but remains negative and is fairly well correlated with oil prices. It is unusual for confidence to increase when oil prices fall, as occurred in Q4.
The Euro turns 20
The Euro has survived its first twenty years, despite the global financial crisis, sovereign debt defaults and crises in the banking system. But the euro-zone will need significant structural reform if the Euro is to be a long-term success.
More euro-zone crises are inevitable over the next twenty years - but these will help prompt reform and propel the single currency towards greater integration. But real economic convergence among the members of the Euro may have to wait until after the Euro has turned 40.