www.research.hsbc.comDisclosures&Disclaimer:ThisreportmustbereadwiththedisclosuresandtheanalystcertificationsintheDisclosureappendix,andwiththeDisclaimer,whichformspartofit.PlayvideowithJanetHenryEconomicsGlobalQ22019By:JanetHenryandJamesPomeroyGlobalEconomicsPoisedforslowergrowthFinancialmarketshaverevivedonthebackofaglobalcentralbank“pivot”……butthathasbeentriggeredbyslowergrowth,lowerinflation…andafearthatthingscouldgetworse1Economics●GlobalQ22019ThecentralbankpivotGlobalgrowthisstillslowingbutequitymarketshavebeenrising,insomecasesmorethanreversingthedramaticequitymarketdeclinesoflate2018.ExpectationsthataUS-Chinatradedealisimminentand–moreimportantly–theUSFederalReserveisonholdin2019,havebeensufficienttoreviveriskappetiteandthehuntforyield.Moreover,thenowextremely“patient”Fedhasbeenaccompaniedbyamoregeneralpivotbycentralbanksglobally:theECBhasdelayedthelikelytimingofitsfirstraterisewhileemergingmarkets,mostofwhichwereonatighteningpathin2018,nowlooksetforthenextmovetobedownwards.Indiahasalreadytakenthefirststep.Despitethemarketrally,thefactisthe“pivot”hasbeenaresponsetotheslowergrowthandlower-than-expectedinflationatatimeofhighuncertainty:regardingtradetensions,Brexitand,shouldthecurrentslowdownevolveintosomethingworse,concernsaboutthepolicyoptionsavailabletofightthenextdownswing.Theargumentsinfavourofpatienceareclear-cut.Ifinflationsurprisesontheupside,centralbanksknowtheycanraiserates.Ifitsurprisesonthedownside,theyfacemuchbiggerchallenges.CloudyoutlookThegrowthoutlookhasbecomeincreasinglycloudy.Theslowdownofthepastyearhasnotbeenquiteassynchronisedastheupswingthatprecededit,eitheracrosssectorsorgeographies.Industryhasslowedmuchmoredramaticallythanservices,evenpushingsomepartsofEuropeandLatinAmericaintoorclosetorecession.USdataheldupmuchbetter,helpedalongbytheheftyfiscalstimulus.Althoughtherewereindicationsthatsomeoftheone-offcountry-specificfactorsdraggingdownindustrialproductionhadruntheircourse,theweaknessisnowincreasinglywidespread.Industrialp...
