And the pain is felt acutely in Asia, home to some of the world’s most export-reliant economies. Purchasing manager indexes across the continent are only starting to show hints of a China-led rebound after several months of souring.
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2. Policy Uncertainty
Trade talks and the tariff wars have fed into the guessing game around how politics and policy will interfere with the fundamentals. Also in the mix are Brexit, a spate of elections — some of them messy, like Thailand — and the sharp turn in the global monetary policy cycle. China’s policy uncertainty has been especially pronounced as analysts try to pick apart how officials will manage the slowdown there.
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In the U.K., Brexit has become the weight that won’t go away, still holding back capital spending and broader economic growth, as London-based Bloomberg Economics economist Dan Hanson shows. The British Chambers of Commerce said this week that investment intentions are at the lowest in eight years as firms refuse to commit to projects in such an uncertain backdrop.
3. Financial Conditions
The financial markets have taken some of the developments in stride, while still showing signs of stress.
It’ll be a gauge to keep an eye on, but for now, the Bloomberg U.S. Financial Conditions Index — which measures the overall level of financial stress in money, bond and equity markets — is at least looking better than it did since touching a 2 1/2-year low in December. A positive value in that measure indicates accommodative financial conditions, while a negative value indicates tighter financial conditions relative to pre-crisis norms.
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4. Dollar Strength
Emerging-market officials especially are attuned to any durable signs that the greenback will return to the strengthening path that added a lot of pressure in 2018. The dollar remains in a relatively stronger band against a basket of major currencies, particularly compared with its position a year ago.
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5. Economic Surprises
Adding to the gloomy hard data is the fact that analysts just haven’t been very good at forecasting recently. Releases have been surprising on the negative side more often — across the U.S., Europe and Asia-Pacific.
It’s even more concerning when you consider economists’ terrible record on predicting recessions.
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6. Low-flation
Since Federal Reserve chief Jerome Powell branded it “one of the major challenges of our time,” stubbornly low inflation has garnered even more attention around the world. Despite unprecedented monetary support, central bankers have been constantly frustrated in their attempts to generate sustainable price growth.
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7. Debt
While debt worries might vary by economy, one area getting extra attention lately — including from former Fed chief Janet Yellen — is the U.S. leveraged loan market. UBS Group AG and Deutsche Securities Inc. analysts have cited the risk, and Taimur Baig, chief economist at DBS Bank Ltd. in Singapore, said last week that he shares Yellen’s concern.
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(Reporting by Michelle Jamrisko; editing by Nasreen Seria, Fergal O’Brien, and Brian Swint)
–With assistance from Finbarr Flynn and Zoe Schneeweiss.
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