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Signs piling up for slowdown in 2019: WTO chief economist
ONE of the key engines of the world economy - global trade - looks increasingly precarious as leading indicators point to a meaningful slowdown next year, says the World Trade Organization's chief economist.
"When you look at those leading indicators, they continue to weaken. It's almost like a death from a thousand cuts," said Robert Koopman in an interview on Thursday.
"There's not any one big change in those leading indicators but, boy, they are starting to add up."
Financial markets have been increasingly concerned about a possible slowdown in the world economy next year and the impact of US President Donald Trump's trade wars.
Federal Reserve Chairman Jerome Powell on Wednesday pointed to investor and business fears over trade tensions and global growth going into 2019. FedEx and other firms have also warned of being hit by slower economic growth.
The WTO in September downgraded its forecast for global trade growth, predicting the volume of goods moving around the world would expand by 3.9 per cent this year, but slow to 3.7 per cent in 2019.
Dr Koopman said the organisation was holding to those forecasts for now, though he added that risks were rising that they could be downgraded again early next year.
A WTO tracker of leading indicators such as purchasing manager indices from around the world and air and sea freight points to slowing global trade momentum, he said.
"If we have an expectation that it is going to move in any direction, it's going to be down," Dr Koopman said of the 2019 projections.
Reasons for concern are surfacing in all the world's major economies, he said, citing the Fed's downgrade this week of its own projections for US growth next year.
"We are concerned about the EU. We are concerned about China. We are concerned about the US." He said the biggest concern is not over the direct impact of the tit-for-tat tariff wars the US has engaged in - most prominently with China - but also with allies from the European Union to Canada.
Although the US and China together account for almost 40 per cent of global output, the goods trade between the world's two largest economies represented less than 3.2 per cent of global trade, according to the WTO.
Instead, Dr Koopman said, the real risk is how those trade conflicts could weigh on businesses and consumer sentiment and spending around the world. "The shoe that all of us are waiting to see is: Does the uncertainty - the policy uncertainty raised by this conflict - spill over into investment and consumer behaviour," he said.
There are some initial signs that business investment is being hit and that consumers in both the US and China are starting to hold back on purchases, he said.
"It isn't a disaster yet. It's weak, but if we start to see a downturn, real declines in investment, that could be pretty problematic for global trade and global growth in general."
The WTO's 3.9 per cent forecast for global trade growth this year is down from 4.7 per cent in 2017.
Still, that's not bad historically: Global trade volumes grew at a rate of just 1.8 per cent in 2016. BLOOMBERG