The first week of the second quarter brought more bad news for the global economy and further evidence that central bankers are hitting pause — or even rewind — on their tightening plans.
Still, amid the darkening outlook, progress in trade talks are providing a glimmer of hope.
This week the World Trade Organisation became the latest body to slash its outlook, cutting its global trade growth projection to the lowest level in three years as it cited the impact of rising commercial tensions and tariffs.
On a more local level, Italy is preparing to downgrade its forecasts, Germany’s five leading research institutes now see the nation’s economy expanding by less than half the rate previously expected this year, while the Asian Development Bank cut its estimates for India and Southeast Asia and the World Bank slashed its forecast for Latin America.
That’s ahead of the International Monetary Funds’s new set of predictions next week, with Christine Lagarde already warning that global growth has lost momentum, leaving the economy in a “ precarious” position.
More immediate data points also made for grim reading.
A report in the UK showed the huge services sector shrank for the first time in more than 30 months, highlighting the damage Brexit turmoil is inflicting on the economy, while the eurozone’s factory slump intensified and US retail sales fell.
Still, US hiring rebounded more than forecast in March and the prior month was stronger than first reported, potentially relieving some concerns about a cooling economy. Policymakers around the world are responding to the bleaker outlook by taking to the sidelines or even becoming dovish again. Amid the gloom, there is some optimism that one obstacle to growth may be lifted.
China and the US claimed progress in Washington talks to end their trade war, with Xi Jinping pushing for a rapid conclusion and Donald Trump talking up prospects for a “monumental” agreement, though a final deal may still be some weeks away.
Drafts of the agreement being crafted would give Beijing until 2025 to meet commitments on commodity purchases and allow American companies to wholly own enterprises in the Asian nation, according to people
familiar with the talks.
In less positive news, European Union ambassadors put off giving the green light for trade talks with the US as France continues to withhold its consent.