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Halloween is still two weeks off but a witching hour for the
global economy could be near as new forecasts and new risks
collide in the coming days.
“You have a confluence of risk at the moment,” and the days
ahead are especially crucial, said Simon French, chief economist
with Panmure Gordon.
The immediate concern: A new 25% tariff imposed by the United
States on some European food and beverage imports due to take
effect on Friday.
Though a planned Oct. 15 increase in tariffs on Chinese imports
was avoided by progress in U.S.-China trade negotiations, the
higher European levies are still a $7.5 billion blow to those
who like Italian cheese or Scottish whiskey.
U.S. economic growth is resting gingerly on healthy consumer
spending, and economists have begun to worry that at some point
the Trump administration's escalating schedule of import duties
will drive up retail prices enough to curb demand and slow
growth.
Globally, it may already be happening as the fallout from the
U.S.-China trade war gets felt more broadly.
The International Monetary Fund and World Bank hold their annual
meetings in Washington in the coming week, and it is expected
the organizations will again mark down their estimates for
growth in worldwide gross domestic product.
National data is certainly pointing that way, with Germany
possibly approaching recession and U.S. factory output slowing.
The IMF last summer trimmed its 2019 forecast by 0.1 percentage
point, to 3.2%, the slowest since the crisis era a decade ago.
New data on eurozone and U.S. industrial production, economic
sentiment in Germany, and U.S. retail sales are among the major
data releases in the coming week that could shed light on
whether any broader weakness is taking hold.
IMF and World Bank officials have cited the U.S.-China trade
dispute as the major drag that caused the global economy to
switch from an era of synchronized growth to one of high and
rising tariffs, slowing trade volume, and "deglobalization."
U.S. and China negotiators on Friday agreed to the first phase
of a trade deal, and Wednesday could mark proof of further
progress. The Treasury Department is due to release its latest
currency report. Though the document is often delayed, if it is
released on time and a spirit of reconciliation is afoot, U.S.
officials may drop or water down the designation of China as a
currency manipulator.
Then there is Brexit, an event perhaps aptly due to come to a
head on Halloween itself, which is the deadline for Britain to
exit the European Union whether costumed in a compromise deal or
not.
EU leaders meet on Thursday and Friday to discuss the situation.
Unless the U.K. Parliament approves a deal, or continues to
reject a "no-deal" departure, the country on Saturday must seek
EU approval for another 3-month extension to continue debate.
(Reporting by Howard Schneider; Editing by Andrea Ricci)
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