www.research.hsbc.comDisclosures&Disclaimer:ThisreportmustbereadwiththedisclosuresandtheanalystcertificationsintheDisclosureappendix,andwiththeDisclaimer,whichformspartofit.PlayvideowithJanetHenryEconomicsGlobalQ32019By:JanetHenryandJamesPomeroyGlobalEconomicsKeepingtheenginerunningInterestratesareonthewaydown……asglobalgrowthslowsandtradeuncertaintypersists……butsustainingtheexpansionwilldemandadelicatebalancingactbycentralbanks1Economics●GlobalQ32019KeepingtheenginerunningTheglobalgrowthoutlookisbecomingmurkier.Growthwasbetterthanfearedinthefirstquarterbutinflationremainstoolowandgrowthrisksareonceagainskewedtothedownside.Businessconfidenceisfaltering,draggeddownbyaweakeningglobalindustrialcycleandongoinguncertaintyoverglobaltradetensionsthatwillnotdisappearjustbecauseUS-ChinatradetalksaresettorestartaftertheG20meetings.Intheshortterm,ariskmanagementapproachtomonetarypolicyimpliescuttinginterestratesimminently:interestratesareatsuchalowlevelthatcentralbanksfeelaneedtopre-emptanyriskofamoreseveredownturn.Furtherout,though,theriskscouldtiltbackintheotherdirection:tacklinglowinflationwithoutriskingfinancialstabilitywilldemandadelicatebalancingactbycentralbanksiftheexpansionistobesustained.OnthewaydownTheshiftdownwardinmarketexpectationsformonetarypolicybythemajorcentralbankssincelate2018hasbeenevenmoredramaticsincePresidentTrumptweetedon5MaythattariffsonUSD200bnofUSimportsfromChinawouldberaisedfrom10%to25%.Irrespectiveofthe29JunecommitmentmadeattheG20meetingbythepresidentsoftheUSandChinatorestartnegotiationsonatradedeal,uncertaintyovertariffsandfuturetradingrelationships,particularlywithChina’stechnologyfirms,appearssettopersistfortheforeseeablefuture.Businesssentimentandinvestmentarelikelytosuffer.Manyindicatorsofindustrialproductionarestillsofteningandmostinflationreadingsarecominginlowerthanexpected.Consensus,HSBCandcentralbankforecastsforGDPgrowthpointtoamodestslowdown,buttheyieldcurveisclearlywarningofsomethingworsethatcentralbankscannotignore.Recessionma...
