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March 28, 2019

Global Economy: Tap in hand

  • The United States (US) economy posted strong 2.9% growth in 2018, led by government spending and private consumption
  • Japan’s exports growth contracted by a sharp 8.4% in January, pushing the trade deficit to a four-year high
  • China’s manufacturing sector continued to contract for the third straight month, as indicated by the official Purchasing Managers’ Index (PMI) data for February

There are mounting concerns of a global slowdown with the trade spat between the US andChina, the Brexit question, and tepid growth in China looming large. In 2018, growth wasmixed in most economies. Apart from the US, most major advanced economies witnessed aslowdown. While growth was strong at 2.9% in the US, it slowed to a four-year low of 1.8% inthe euro zone. In the United Kingdom (UK), growth was at a six-year low of 1.4%. Japan’sgross domestic product (GDP) growth moderated to 0.8%. Among emerging marketeconomies, China clocked its slowest GDP growth in the past three decades, at 6.6%.


As a result, easy monetary policy is making a comeback. The US Federal Reserve has decidedto be patient with further rate hikes, signaling a pause in the rate hike cycle with the futurepolicy action. The European Central Bank (ECB) has stated it would maintain its 0% policyrate until the end of 2019 and has announced launch of a new round of targeted longer termrefinancing operations to ensure favorable credit conditions amid economic slowdown.