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WORLD: Difficult global background: global economy slow-down and growing investment uncertainty

After a decade of moderate economic growth, global growth has clearly slowed down in all regions in the first semester of 2019. However, most large economies still face limited risk of recession.

So far, the slowdown seemed to be provoked by long-term factors such as stagnant labour supply and weak productivity growth rather than by a broad decrease in investment. Labour markets are tight in most major industrialized countries.

Global growth lacks demand drivers and there is increasing uncertainty (US-China escalating tensions in trade and technology sectors, the Brexit-issue). Further to spreading to national-security and domestic political issues, trade (and currency) dispute could disadvantage both the involved parties and the global economy. With the deterioration of economic growth, the public debt issue could become an urgent problem in certain countries, adding financial instability to an already precarious economic situation.

According to the World Bank, global trade growth should fall from 4.1% last year to 2.6% this year. The weakness in trade has affected mainly capital goods. The current trade disputes uncertainties and other geopolitical issues impact the global business confidence. Companies are more hesitant to program large capital expenditure plans. While investment in construction is strong, investment in equipment and machinery is weaker than last year.

Industrial countries face decreasing demand, lower inflation rates and decreasing inflation expectations. The economic slowdown was followed by a shift in monetary policies by the world’s largest central banks toward greater easing. Economic actors are increasingly concerned by the economic impact of increased extreme weather (hurricanes, floods, wildfires).

 

September 2019

 

ECSA Chemicals AG
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