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.
The world economy remains strong and the near-term outlook is fairly bright, despite the recent escalation in trade tensions. Global growth is robust as major economies continue in mature phases of an extended economic expansion.
Generally, the month of May was consistent with the 2018 story of a global economy entering a mature stage characterised by market volatility, the gradual emergence of inflation, higher interest rates (primarily in the US) and a softening of global economic growth indicators.
Since February, equity market volatility has jumped from historically low levels, although this largely seems to have been technically-driven. Continued synchronized global growth and historically low interest rates are still supportive of equity markets, while economic indicators are not yet signaling the end of the business and market cycle that started in 2009.