Uncertainty about trade and populist policies continues to weigh on market sentiment and business confidence. Some economic indicators are weakening in 2019 from the relatively positive position in 2018.
The abrupt increase in US tariffs on imports from China threatens the nascent recovery in global industrial production that appeared to be underway. Tariffs and tariff fears have a large impact on high frequency data such as trade, industrial production, business investment, PMIs, and many highly correlated financial asset prices. Roughly half of China’s exports to the United States face 25% tariffs.
For New Zealand, our economy has been supported by the tailwinds of record-high Terms of Trade, low interest rates and strong population growth. Nonetheless, business confidence remains weak and points to an upcoming slowdown in growth led by a fall in business investment.
Despite a tumultuous month for equity markets, the current period of steady expansion of the global economy continues. The expansion, however, has become less balanced and may have peaked in some major economies.