Investment versus uncertainty

Posted by: Paul Donovan

25 Apr 2019
  • The slowdown from above-trend global growth to trend global growth over the past nine months is natural and nothing to be scared of. However, the slowdown was exaggerated by a global slowdown in investment spending by companies. Uncertainties over trade taxes and supply chains have delayed investment, weakening capital spending, export and manufacturing data.
  • Today's US durable goods orders numbers offer some additional insight. There are hopes that fading fears over trade taxes may help the numbers. South Korea's GDP data showed weakness in the first quarter based on a sharp decline in capital spending. As elsewhere, consumers held up.
  • The Bank of Japan did nothing on its headline policy measures. The Bank of Japan is good at doing nothing. There were some dovish signals in the forward guidance, but these had been expected by the financial markets.
  • Europe has little of real interest. Sweden's Riksbank is not expected to change policy today. It is the guidance that is in focus. The UK offers retail sector sentiment, which can easily be ignored – although once again income and sales tax revenues exceeded expectations yesterday (unless the British are voluntarily paying more tax, things may be better than official growth data suggests).

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