N°35JUNE2019SCENARIOECOEconomicandSectorStudiesLATECYCLETENSIONS➢Despiteawelcomebouncebackonthe1Q19GDPfiguresinmanyoftheadvancedeconomies,mostsignalsstillpointtoaslowdownoftheglobaleconomyahead,amidstheightenedtarifftensionsbetweentheUnitedStatesandChina,on-goingBrexituncertaintyandvariouscountry-specificheadwinds.➢Againstabackdropoflowinflationandsignsofslowinggrowth,centralbankshaveshiftedtoamoreaccommodativetoneintheirforwardguidance.WeexpectthestartofaratecutcycleintheUnitedStatesaroundtheturnoftheyear,whileadditionalmonetarystimulusisonthecardsintheeuroarea.➢ThefiscalstanceissettoturnlessfavourableintheUSheadinginto2020butshouldremainsupportiveinChina.Withintheeuroarea,thefiscalpolicyvariesbymemberstate,butinaggregateweexpectamoderatelypositiveimpulse.➢Financialmarketshavebecomemorefocusedonthepoliticalrisksamidstconcernsthatthesearenowbitingintothegrowthoutlook.Lowyieldlevelsandflatyieldcurvesonthemajormarketssignallowinflationandgrowthexpectations.Furtherdownsideshockstogrowthwouldweighheavilynotablyonhighlyindebtedcorporatesandemergingmarketassets.➢RisingunitlabourcostsinEuropeandtighterlabourmarketsintheUScouldstillleadtoinflationarysurprises.Anear-termcorrectiononbondyieldscouldproveasourceofvolatility.SCENARIOECO|N°35–JUNE20192OutlookSummary.........................................................................................................................................................3Pendinginflation…........................................................................................................................................................4EconomicForecasts.....................................................................................................................................................6EuroArea......................................................................................................................................................................7Germany..............................................
