Global economy: Business cycle moving lower - Danske Bank
|Analysts from Danske Bank, see clear signs that the global business cycle has peaked in early 2018. They don’t expect a marked downturn.
Key Quotes:
“While the cycle is softening, we still expect growth levels to stay above potential growth in 2018 and 2019. US fiscal easing will temper any deceleration in 2019.”
“After a strong synchronised upturn in the global industrial cycle since early 2016, we see increasing signs that the cycle has peaked and that growth is decelerating. The euro surprise index has fallen sharply, our MacroScope business cycle models have weakened for three months now and we have witnessed declining upward momentum in global metal prices. All signs of a weakening cycle.”
“We look for further deceleration in the coming quarters due to (a) globally tighter monetary conditions and higher bond yields across regions, (b) lower real wage growth (due to the rise in inflation) and (c) an increased focus on deleveraging in China that has yet to feed through to growth. The rising tensions in the US-China trade dispute may also lead some companies to postpone investment.”
“While global growth is decelerating, we do not expect it to turn into a marked downturn. The headwinds are simply not big enough and if growth should slow more than expected, the central banks will be quick to postpone monetary tightening and in the case of China reverse it.”
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