Global economic confidence continues to point to sluggish activity. That said, there’s growing evidence that the downturn in global manufacturing has reached a trough. Indeed, the uptick in confidence actually suggests the global industry is about to turn the corner.
12.12.2019 | 12:57 Uhr
Although (geo)political uncertainty remains abundant, the narrative seems to have improved over the past weeks. There are signals that the US and China are on the verge of striking some sort of mini-trade deal (including a partial rollback of tariffs). Meanwhile, chances of an imminent hard Brexit have receded following the Brexit extension to early 2020 and current election polls. What’s more, the EU may escape US import taxes on cars.
That said, any recovery in 2020 looks set to remain fairly modest by past standards. First, (geo)political tensions are unlikely to disappear going forward. A US-China deal may not happen. And next year’s US Presidential race may well add to uncertainty. Second, the automobile sector still faces difficulties on the back of modest demand, high inventories and a challenging transition towards electronic cars. Third, even though the latest figures out of China point to an improving economic environment, a strong rebound in activity seems unlikely. Finally, talk of more expansive Eurozone fiscal policy remains fairly cheap for now.
The combination of weakening economic momentum, below target inflation and weakening price pressures has led central banks to become much more dovish throughout 2019. Monetary policy will remain loose in 2020 and both the Fed and the ECB are about to stress the importance of symmetry in their inflation framework. There has been more discussion on fiscal easing but those words look still fairly cheap for now.