UBS AM: Global growth steadies above trend

• The rate of acceleration in global economic growth has moderated from very strong levels in 2017 while growth rates by country and region are also more differentiated and less synchronized. But we expect global growth to be solid in 2019 and above long-term trend growth for at least the first half of the year.

• Higher trade tariffs, rising bond yields, policy uncertainty and higher geopo- litical risks all raise understandable concerns about the outlook for global GDP into 2019. But without a more violent shift in expectations for any of these themes, we expect the com- bined impact to be moderate.

• Developed world consumption is likely to remain a key driver of global g owth in 2019. Low unemployment and continued wage growth across the US, UK, Europe and Japan are the key factors here. US household leverage is not particularly elevated— suggesting that consumption growth is unlikely to demonstrate a high sensitivity to higher rates while wages are still rising and employment growth remains strong.

• And while monetary policy support to demand is likely to reduce further in 2019—it is likely to do so only gradually; financial conditions globally are not restrictive.

• Outside of the US, recent monetary, fiscal and regulatory measures in China aimed at cushioning growth are likely to work their way through in the coming months. In Europe and Japan, we expect a pick-up in manufacturing production as one-off factors that have curtailed output in 2018 fall away. In the US we expect the growth impulse to remain comfortably above trend but to moderate from the very strong momentum of early in 2018 as the fiscal stimulus starts to wane and as rate rises begin to take a gradual toll.

The full Macro Quaterly containing this themes:

• Global growth steadies above trend
  
• Higher volatility
  
• Moderately higher inflation and bond yields
  
• Geopolitics and protectionism
  
• The monetary policy balancing act
  
• Trades by theme
  
• Asset class attractiveness
  

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