Air of gloom as Davos looms
Elite economies losing momentum as financial data falls short and political risks mount
High in the Alps, the global elite will be feeling low about the economic future. The ski resort of Davos, Switzerland, this week again hosts the World Economic Forum’s annual meeting, drawing JPMorgan Chase’s Jamie Dimon, German Chancellor Angela Merkel, Facebook chief operating officer Sheryl Sandberg and Chinese Vice-President Wang Qishan.
Domestic political strife is forcing United States President Donald Trump and British Prime Minister Theresa May to stay home.
Those still going will do so as their economies lose momentum just a year since they enjoyed a rare synchronised upturn. While few predict a recession, companies are the most bearish since 2016 as economic data falls short of expectations and political risks mount amid an international trade war, US government shutdown and Brexit.
“The mood is going to be much darker than a year ago,” said Nariman Behravesh, IHS Markit’s chief economist, who will be in Davos.
“A recession isn’t imminent, but as economies slow it wouldn’t take much to topple growth.”
The summit formally begins late tomorrow although the tone will be set a day before when the International Monetary Fund publishes new growth forecasts and China releases data likely to show expansion in 2018 was the slowest in almost three decades. The Bank of Japan and European Central Bank also have meetings next week at which policy makers may recast their outlooks.
“The evidence is consistent with slowdown rather than slump, but downside risks have increased,” said Tom Orlik, chief economist at Bloomberg Economics.
Some of the companies sending executives to Davos are already sounding less upbeat. Dimon’s
The mood is going to be much darker.
Nariman Behravesh, IHS Markit
JPMorgan last week missed profit estimates and he warned the US economy could stop growing if the government shutdown endures.
BlackRock, which will be represented by chief executive Laurence Fink, said this month it’s cutting jobs.
Societe Generale, helmed by Frederic Oudea, this week reported “challenging” conditions as it warned fourth-quarter trading revenue probably fell 20 per cent.
It’s not just Trump and May who have problems. French President Emmanuel Macron faces protests against his reform programme, Greek Prime Minister Alexis Tsipras’s governing coalition has splintered, Canadian Prime Minister Justin Trudeau is at odds with China over the arrest of a Huawei Technologies executive and Italian Prime Minister Giuseppe Conte’s populist coalition is under strain.
In a potential theme for Davos week, Fink has told fellow CEOs they should take a larger role fixing political problems that Governments prove incapable of solving.
“Stakeholders are pushing companies to wade into sensitive social and political issues — especially as they see Governments failing to do so effectively,” he wrote in a letter.
The global economy is nevertheless still stronger than a decade ago.
The OECD said last week that employment in its member nations reached 68.4 per cent in the third quarter of last year, the most since it began compiling records in 2005.