Risks intensify in global economic outlook

Risks from US trade disputes and other factors are intensifying, dampening the global economic outlook even as overall growth is expected to continue.

“The OECD (Organisation for Economic Co-operation and Development) leading economic indicator suggests a deceleration in the global economy. We see global GDP growth losing steam, from 3.2% in 2018, to 3.0% in 2019,” said Martha Moore, senior director of policy analysis and economics at the American Chemistry Council (ACC).

“Risks are intensifying as oil prices are rising, there is monetary tightening in most economies and we are seeing growing trade tensions and protectionism,” she added.

Moore spoke at the 11th ICIS World Chemical Purchasing Summit in Boston.

The US economy continues to accelerate this year with expected GDP growth of 2.9% in 2018 before easing to 2.6% in 2019.

ACC’s Moore warns of risks

“The key risks are from trade tensions, leading to a higher cost of imports and retaliation against US producers,” said Moore.

However, the economist sees continuing growth in the US economy across multiple sectors – “almost firing on all cylinders” – with rising consumer confidence, business investment and manufacturing activity.

Housing continues on a slow and steady climb even with challenges in cost of materials and labour, with US housing starts expected to rise to 1.39m in 2019 from 1.33m in 2018, noted Moore.

And US light vehicle sales are falling from the peak but maintaining at healthy levels. She expects auto sales to fall from a peak of 17.5m units in 2017, to 17.0m in 2018 and 16.8m in 2019.

Europe’s economy came off a strong 2017 with 2.5% GDP growth but has lost momentum. The European Central Bank is withdrawing stimulus and there is the risk of the financial crisis in Turkey impacting creditors 
in Spain and France, the economist said.

China growth has also been easing as its Blue Skies initiative has helped reduce excess capacity and housing inventory growth has slowed.

Risks come from a potentially messy deleveraging as well as the trade dispute with the US, said Moore.

Emerging markets are seeing far less robust expansion, as evidenced by their lower manufacturing PMIs (Purchasing Managers’ Indexes), she added.

Trade continues to be the major risk for the US and global economies.

“Between NAFTA, Section 232 (tariffs to protect national security – ex: steel and aluminum), Section 301 (US-China), and the US threatening to leave the WTO (Word Trade Organization), this has the potential to be hugely disruptive,” said Moore.

“In response to the US 232 tariffs, there has already been $3.5bn in US chemicals impacted. It also takes about 18,500 tonnes of steel to build an ethane cracker, so we’re watching this as well as it relates to new investment,” she added.