Kick-off 2019 with courage and discipline

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2019 begins with a synchronised global slowdown. All recently published data, particularly trade and manufacturing data, show that economic activity is slowing in all countries simultaneously. In China, exports and imports contracted sharply in December, as did most Asian economies. In Europe, growth also seems to be slowing more sharply than expected. Germany – the Eurozone economy most exposed to the manufacturing sector and world trade – seems to be the most affected. Finally, in the US, business investment shows early signs of weakness (deterioration of ISM indexes or confidence of small businesses); and the rise in credit spreads will certainly weigh on investment in 2019. In these conditions, should we fear a fall in global growth? Or is it a temporary slowdown? The slowdown in world trade is likely the result of uncertainty over trade between the US and China. The global uncertainty index reached its highest level in December. The previous peak was just after Donald Trump’s election. The sharp trade tensions between the two countries are a key source of uncertainty. It is indeed in the US and in China that it has increased most significantly over the recent period. An increase in uncertainty tends to weigh on the trade of many countries through a slowdown in investment and disruption of production chains. That being said, the US and China concluded a truce on December 1 that both parties have every interest in respecting, given the darkening economic outlook.