E Fears Of A Global Slowdown Are Tied To Worries About China’s Economy

It is widely accepted that global economic growth peaked last year, and that growth this year and next will be somewhat slower. The global economy, which grew at an estimated 3.7% pace in 2018, is expected to average only 3.5% growth this year and in 2020.

The latest worries about global slowing can be traced to the fact that China’s manufacturing industry seems to be slowing. China’s manufacturing PMIs recently fell into contraction territory (i.e., below 50), though service spending intentions remain significantly above the important 50-demarcation line.

It should also be remembered that if the US and China do not reach a new trade arrangement by March 1, President Trump has threatened to raise the current 10% tariff on $200 billion worth of Chinese goods to 25%. If that happens, China will of course retaliate.

The OECD estimates that a full-blown trade war with China could reduce global GDP growth by 2021 by about 0.5%.

In the slower growing global economy Canada’s economy, though reasonably tight in terms of the job market, is expected to continue to underperform the US economy.

Canadian real GDP is projected to expand 2.2% in 2019 and 1.9% in 2020, while the American economy is projected to advance 2.7% this year and 2.2% in 2020.

As for the other advanced economies, growth in the Euro Area and Japan is also projected to moderate over the next two years.

Because of Brexit uncertainties, the British economy is projected to remain in a slow growth trap (much lower than the Euro block) of 1.2% in 2019 and 1.1% in 2020.

The two largest emerging market economies, India and China, are expected to continue to grow faster than the G7 countries in 2019 and 2020. India’s economy is also expected to grow faster than China’s.

India’s economy, which could potentially benefit from the trade war hurting China, is projected to expand by 7.3% in 2019 and 7.4% in 2020. China’s economic growth rate is expected to slow from 6.3% this year to 6% by 2020.

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