Our monthly look at the global macroeconomic climate

The global macroeconomic climate under the spotlight in DavosIt’s January so that means it’s time for the annual gathering of the “great and the good” at the World Economic Forum in Davos.

This year, by contrast to January 2018, there is more than a tinge of gloom about the proceedings from which both US President Donald Trump and UK Prime Minister Theresa May will be missing due to more pressing issues at their respective homes.

So far, there have been two stand-out revelations about the global macroeconomic climate, neither of them encouraging.

According to a survey carried out by PwC “Pessimism among chief executives has risen sharply in the past 12 months as the leaders of the world’s biggest companies have taken fright”, a sixfold increase since January 2018. Their concerns have been largely attributed to increasing protectionism, or nationalism as some would have it, notably in Turkey, Poland, Italy and the USA and to the deteriorating relationship between the USA and China as a result of the ongoing trade war instigated by Trump.

The IMF (International Monetary Fund), too, has issued a warning of escalating tensions, not only from the aforementioned trade war, but also because of the ongoing indecision, indignation and intransigence that is besetting all participants in the still inconclusive negotiations for UK leaving the EU, aka Brexit.

Brexit concerns are clearly having an impact on the UK economy, which the ONS (Office for National Statistics) revealed has been stagnant for the last three months of 2018. Both the manufacturing and pharmaceutical industries performed particularly poorly and there has been a marked reduction in export demand.

Arguably, however, there are also repercussions elsewhere, some economic, some political.

Germany has experienced slowing growth, Italy’s financial markets remain unsettled by the now-resolved argument over its budget, which planned increased spending. China’s growth, too, has slowed markedly.

Indeed, there are signs of weakness in the European economy with the prospect of a recession and likely need for the European Central Bank to give more support for some countries.

Arguably, the UK’s dogged determination to leave the EU Is contributing to EU’s problems and strengthening populist/ nationalist demands that are also undermining the global economy.

Then there is the increasing urgency to tackle both climate change and the vast income inequalities that exist in many developed and developing economies.

All in all it looks like the global macroeconomic climate at the start of 2019 is for the time being decidedly stormy.

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