Despite headwinds, the global economy should continue to grow with low inflation in 2020
Chief Economist John Greenwood and Assistant Economist Adam Burton share their outlook for the global economy in 2020.
- In several key developed economies, broad money growth has been accelerating for much of 2019. In the US, the commercial banks are effectively financing the large fiscal deficit, which in turn creates new money and has pushed the M3 broad money growth rate from under 3% year-on-year at the start of the year to 9.7% year-on-year as of November 2019. This is the highest rate of US broad money growth during this entire business cycle expansion.
- In the Eurozone, M3 broad money growth has accelerated more moderately since May 2018, from 3.4% to 5.7% year-on-year as of September 2019. This is still too low a rate of broad money growth for the Eurozone economy, although the increase in the rate of growth is positive news for the region. Brexit uncertainty has started to unwind, and M4x broad money growth has started to recover from the very low growth rates experienced in the first half of the year.
- Unfortunately, the upturn of money growth in developed markets is not apparent in emerging economies. Global trade is often seen as the main headwind for emerging economies, particularly China, but we believe there are more severe domestic headwinds affecting the economies of China and India.
China and other emerging markets
In contrast to the consensus which considers China’s growth mainly at risk due to President Trump’s tariffs on Chinese exports to the US, we believe the main reasons for China’s economic slowdown are domestic. Read more