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November 28, 2018

Global Economy: Slack after spurt

  • The ongoing tariff war hit Q3 growth in the United States (US) and China as growthmoderated on negative contributions from net exports
  • Q3 growth weakened in the euro area (EA-19) to a four-year low, while it was thestrongest in the past two years for the United Kingdom (UK)
  • Crude prices averaged a four-year high of $81 per barrel in October

There’s a wobble in global growth. Intensifying protectionism, the escalating trade warbetween the US and China, geopolitical tensions, uncertainty over Brexit, and tighteningpolicy rates in the US are all taking a toll. And this list does not cover crude price dynamics.It’s some way off from last year’s talk of a synchronized global upswing.


Growth moderated in most global economies in Q3 of 2018, compared with Q2. The ongoingtariff war dented Q3 growth in both the US and China as net exports shaved off from overallgross domestic product (GDP) growth. The tariff war also squeezed growth in Japan, whichwas under pressure from a series of natural disasters. China posted its slowest growth sinceQ1 2009. Among other key advanced economies, while EA-19 clocked its weakest growth inQ3 since Q2 2014, the UK posted its strongest since Q4 2016.


Most major central banks held on to their policy rates. On the currency front, mostcurrencies depreciated against the strengthening dollar. Concern surrounding Italy’s fiscaldeficit, a no-deal Brexit, and the slowing Chinese economy amid the US-China tariff warweighed on the euro, sterling pound and yuan, respectively. These factors also led to a pickupin demand for high-yielding dollar-denominated safe-haven assets.