Economic Update April 2019
Summary
Conflicting signals from the big two
Conflicting signals emanated from the world’s two largest economies over the past month, each with implications for the global growth outlook. The first was the inversion of the US yield curve, which has traditionally been a reliable (but
not perfect) predictor of recession in the US economy in the six to twelve months after it occurs. The second signal was more positive, a tentative sign that previously decelerating Chinese economic indicators are beginning to pick up.
Should things play out as expected, it will be the Chinese economy taking a more prominent role in driving global growth this year and next, as the US economy decelerates.
Nonetheless, geopolitics will continue to have the potential to push economies from this path and markets will likely remain alive to this prospect and relatively volatile as a result. The most prominent example of potential derailment is the
seemingly endless rollercoaster that is the UK’s Brexit process, which has resulted in a sharp erosion of business confidence. Despite this, the UK labour market continues to defy Brexit uncertainty, posting solid new job numbers that
saw unemployment edge lower to a four-decade low.
Should things play out as expected, it will be the Chinese economy taking a more prominent role in driving global growth this year and next, as the US economy decelerates.
- Alex Joiner
Elsewhere, in Japan and Europe, both economies continue roll on more than slowly than investors would prefer, with both also posting solid labour market data.
In Australia, an upcoming federal election looms as a fork in the road for future economic policy. Not surprisingly, its central bank has signalled a more dovish bias and stands ready to act should its economy soften from here.
About the author
Chief Economist
Alex Joiner, PhD
Joined in 2016
Alex Joiner is Chief Economist at IFM Investors. He is responsible for the firm’s economic, financial market and geopolitical risk analysis that is key in IFM’s investment process. In this capacity he engages with IFM’s domestic and global clients on macro-investment trends and themes. He is a frequent commentator on economic and markets via traditional and social media and regularly speaks at public forums and conferences. He has over two decades of professional experience in economic and markets and prior to joining IFM was the Chief Economist at Bank of America Merrill Lynch (Australian & New Zealand) after being a senior economist at ANZ Bank. He holds a First Class honours degree in Economics and a PhD in Econometrics from Monash University. Alex is also committee member of the Australian Business Economists.