China Growth Mystery Scares Global Economy in Weakest Shape in Years

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.

One Direction

OECD gauge has slipped lower, pointing to easing global momentum

Source: Organisation for Economic Cooperation and Development

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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.

Soaring Trade Deficits

The U.S. goods’ deficit hit a 10-year high in 2018, with China’s piece growing

Source: Census and Bureau of Economic Analysis

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