Citing “further disruptions in trade policies” and weakening emerging market economies, the International Monetary Fund (IMF) lowered its global growth forecasts to 3.7 per cent this year, down from 3.9 per cent it forecasted on April. “Two major regional trade arrangements are in flux – NAFTA (where a new trilateral agreement awaits legislative approval) and the European Union (with the latter negotiating the terms of Brexit).
US tariffs on China, and more broadly on vehicles and automotive part imports, may disrupt established supply chains, especially if met by retaliation,” outgoing IMF chief economist Maurice Obstfeld said.
In the meantime, UK GDP growth flattened in August, as the increase in industrial production was offset by a contraction in the construction and the farm sectors, the Office for National Statistics (ONS) reported last week. GDP growth in August flattened to zero per cent from 0.4 per cent in the previous month, missing City economists’ forecasts of 0.1 per cent growth. However, in the three months to August, the UK economy grew by 0.7 per cent, buoyed by the hot summer, the ONS said.
Analysts cautioned that the weak August reading could serve as a warning signal for weaker economic growth in the coming months, underpinned by mounting concerns over the risks from a no-deal Brexit.
Finally, a report released by the US Labour Department last Wednesday showed that producer prices rose in September, with an increase in prices for services offsetting a modest drop in prices of goods, including a 3.5 per cent drop in gasoline prices. The Labour Department said its producer price index for final demand increased by 0.2 per cent in September, reversing a drop of 0.1 per cent in August. Economists had expected prices to rise by 0.2 per cent.
September’s rise in producer prices was the first monthly rise since June. Yields on US Treasury bonds rose on this news. In the meantime, US consumer prices rose less than expected in the 12 months through September, with an increase of 2.3 per cent, slowing from an August reading of 2.7 per cent.
This report was compiled by Bank of Valletta for general information purposes only.