Global outlook has deteriorated - NAB

In view of analysts at National Australia Bank, the global outlook has deteriorated as the financial markets hit a pothole in May following an escalation of the US-China trade dispute and the short-lived US threat to raise tariffs on imports from Mexico.

Key Quotes

“More dovish expectations around central bank policy have helped support markets; we now expect that the US Fed will cut rates (by 50bps) over the second half of 2019. The latest data confirm that major AE growth strengthened in Q1 but this is unlikely to be sustained over the rest of the year.”

“Emerging market economies are more trade exposed than the AEs and therefore the increase in trade tensions are a negative for them. We have again lowered our global growth forecasts – to 3.2% in 2019 (from 3.3%) and to 3.3% in 2020 (from 3.4%) as we expect that last month’s trade disputes will negatively affect business sentiment and investment.”

“The forecast revision is also consistent with the message coming from our leading indicator of global activity.”