PwC's Macroeconomics team presents Global Economy Watch, a short publication that looks at the trends and issues that are affecting the global economy and details our latest economic projections for the world's leading economies.
Predictions for 2019: Coming off the boil
The US government deficit breaches $1 trillion again
Around 40 countries will see their workforces shrink
View our economic projections
In our first edition of 2019, we look ahead to the trends we expect to come to the fore in the global economy in the year to come. We have identified three themes for 2019:
Global growth will slow. The global economy enjoyed a mini-boom between the end of 2016 and early 2018, when growth picked up in most major economies. This phase is now over, and in 2019 we expect the G7 economies to return to growth rates close to their long-run averages. In the US, the boost from fiscal stimulus is likely to fade, higher interest rates may dampen consumer spending and a strong dollar could continue to drag on net exports. We expect growth to moderate from an estimated 2.8% in 2018 to around 2.3% in 2019. In the Eurozone uncertainty relating to global trade tensions and Brexit will take a toll, while the European Central Bank is likely to offer less support to growth as its quantitative easing policy ends. Growth in China is also expected to slow relative to 2018. Although the government will try to ensure that the slowdown is minimal, the impact of US tariffs and the need to control debt levels are likely to result in at least a modest deceleration in growth in 2019. Emerging market currencies could come under periodic pressure from a strong US dollar, but this effect is likely to lessen later in the year, when we believe it will become more evident that the US economy is slowing.
Workers and wages will come to the fore. Labour markets in advanced economies are likely to continue to tighten, even if job creation slows. This may push up wages, but cause problems for businesses looking to fill talent shortages. In 2019 we expect unemployment rates to fall a little further in the US and Germany, where the rates of job creation have remained strong. But many other economies could show evidence of hitting structural floors. There is already evidence of this in Canada, where unemployment reached a 40-year low of 5.8% in late 2017 but has failed to fall any further, triggering an acceleration in wage growth. Other economies, such as the Netherlands, Denmark and Belgium are approaching their respective floors, with the pace of decline in joblessness slowing sharply. Assuming an orderly Brexit, by end-2019, the UK may also see unemployment flattening off at around current levels, though a disorderly ‘no deal’ could lead to a marked rise in unemployment.
Trade conflicts will deepen. We expect trade wars to continue in 2019. This is likely to generate further uncertainty for policymakers and businesses. The former will try to assess the impact of potential tariffs on growth and inflation, while the latter will attempt to mitigate the impact on their supply chains and customers. The main focus of tensions is likely to remain US-China trade, but there will always be the risk of this escalating into a wider trade conflict and businesses accordingly need to plan for different scenarios.
Senior Economist Barret Kupelian gives an overview of our latest Global Economy Watch report - our predictions for 2019.
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