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
Bachelor of Economics (Hons) (Latrobe University), PhD (Econometrics) (Monash University).
Alex is IFM Investors’ Chief Economist and has more than a decade of experience in the field. He is responsible for the firm’s economic, financial market and policy analysis and forecasting. Alex is also a member of the firm’s Investment Committee. Prior to joining IFM Investors, Alex was the Australian Chief Economist for Bank of America Merrill Lynch. In this role, Alex was responsible for providing economic insight and forecasts across asset classes and conveying these views to both domestic and global investors. Alex was also previously a Senior Economist at the ANZ Bank.