China Growth Mystery Scares Global Economy in Weakest Shape in Years

(Bloomberg) --

The growing mystery of where China’s rapid slowdown is headed may become the biggest risk on the horizon, even as Brexit and a solution to U.S.-China trade tensions are kicked into the long grass. 

Here’s our weekly wrap of what’s going on in the world economy.

Recession Watch

The global economy’s in its weakest shape since the financial crisis a decade ago, Bloomberg Economics analysis shows. And the reminders are all around: China got more affirming evidence of its big slowdown, with industrial output and retail sales softening and a jump in unemployment. The question now is how big that slowdown will be, and what China’s stimulus — and the U.S.-China negotiations — will do to put a floor under it. The Chinese premier pledged Friday that they wouldn’t use quantitative easing or massive deficit spending to ease the pain. Japan got more bad news on manufacturing sentiment and in the hard investment data. Germany, Europe’s growth driver, can’t hide from the daunting external risks. And Turkey just entered its first recession in a decade. Still, here are a few reasons to believe things won’t be all bad.

Read more:

• Brazil Industry Flop Raises Doubts About Economic Recovery
• China Seeks to Defuse Its $4.5 Trillion Local Hidden Debt Bomb
• Powell’s Labor Market Worries Find Plenty of Support in the Data

Trade Turmoil

Despite claims of progress in talks by both sides, a hoped-for summit between President Donald Trump and President Xi Jinping to sign an agreement to end their trade war will now take place at the end of April — if it happens at all. That comes after the Chinese central bank chief hailed movement on many “crucial” issues and Trump attempted to soothe Chinese concerns that he’d do to Xi what he did to Kim Jong Un. Meanwhile in Europe, uncertainty over how and when the U.K. will exit the European Union persists and no matter the path ahead, damage already has been done to the British economy.

Read More:

• Cohn Says U.S. Is ‘Desperate’ to Sign Trade Agreement With China
• The Case of the Vanishing Van, And Its Meaning for the Trade War
• China Calls for U.S., European Companies to Join Belt and Road

Central Banker Puzzles

Low inflation continues to befuddle central bankers the world over. Even as it gives relief to some emerging markets that rushed to tighten last year, it’s maddening Federal Reserve officials in its mystery and engendering mixed feelings among Indian policy makers ahead of the election there. The Fed chief offered some fresh relief for global peers in reiterating his understanding of the word “patience.” Bank of Japan held interest rates Friday and downgraded their economic assessment, while observers are gloomy enough that they still see potential for stimulus as the Fed and ECB turn more dovish. The BOJ offers longer-term cautionary tales for other central banks as they eye the next downturn.

Read More:

• Why Central Banks Like Canada’s Are Finding It Hard to Get Home
• ECB’s Loan Bazooka Might Not Reveal True Firepower for Months
• Brazil New Central Banker Seeks Formal Autonomy to Do His Job

Weekend Reading

• Fed Puts Inflation Expectations at Heart of Major Policy Review
• China’s Tab at World Bank May Get Squeezed Under New Chief
• Finally Some Good News for German Growth as River Rhine Refills
• Keynes Redux? How Lawrence Summers and MMT Align: Tom Orlik
• Modern Monetary Theory Is Getting No Love From ECB Policy Makers
• Cheap Money Era Shows No One Knows How Monetary Policy Works
• Australia’s Spending Bonanza Gives RBA Breathing Room on Rates
• China Struggles to Reassure Foreign Firms With New Regulations

Chart of the Week

Sputtering Rural Growth in India Raises Stakes for Modi

To contact the editor responsible for this story: Zoe Schneeweiss at zschneeweiss@bloomberg.net, Lucy Meakin

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