Darkening clou global economi
AFTER GALLOPING along for the past two years, the global economy is showing signs of weakening, with the United States, China and Europe all facing the rising threat of a slowdown.
Few economists foresee an outright global recession within the next year. But the synchronised growth that powered most major economies since 2017 appears to be fading. The risks have been magnified by the trade war raging between the United States and China, the strife dividing Britain over an exit from the European Union, and the Federal Reserve’s continuing interest rate hikes.
It’s all been enough to contribute to a broad retreat in global stock markets. Counting Tuesday’s deep losses, US stock indexes, once up around 10 per cent for the year, have surrendered all their 2018 gains.
The Fed is expected next month to raise its key short-term rate for the fourth time this year. The central bank’s rate hikes help control inflation. But they also make loans costlier for consumers and businesses. And for countries that borrowed in US dollars, the Fed’s hikes make debts harder to bear. Argentina, for one, has slid into recession as its cost of repaying its debt has surged.
“We can’t continue to grow this fast for much longer without risking inflation,” Adrian Cooper, chief executive of Oxford Economics, said of the still-solid US economy. “That’s ultimately what the Fed is trying to achieve with its steady movement in interest rates. The skill is to do so in ways that don’t create a big downturn.”
The concerns have grown enough that Larry Kudlow, President Donald Trump’s top economic adviser, on Tuesday dismissed the worries roiling the markets.
“Recession is so far in the distance, I can’t see it,” Kudlow told a group of reporters outside the White Ho It’s a very strong econo
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