The IMF is turning quite pessimistic and expecting the global economy to grow at just 3% this year, which is 0.2% lower than the previous estimate and the slowest pace since the global financial crisis in 2008. The IMF does expect growth to improve slightly to 3.4% in 2020, driven by improvements in some emerging markets like Turkey, Iran, and Argentina.
Moral of the story: To put this into context, if global growth slows to less than 2.5%, it would be considered a recession. The IMF predicts that if all the tariffs in the China trade war are implemented, it would reduce global growth by 0.8% by 2020. This means that current growth forecasts leave **very** little room for policy mistakes.
Retail rally ruined
Retail sales declined in September for the first time in seven months. Auto and gas sales represent a large portion of total retail sales and were negatively impacted by lower gasoline prices and end-of-summer sales at auto dealerships. Even excluding these two items, retail sales demonstrated general weakness with a drop even in internet sales (first time this year) and the only sign of strength came from health stores and pharmacies (flu season prep?).
Moral of the story: Retail sales could have been impacted by the GM strike taking out tens of thousands of auto workers in the Midwest for five weeks – those workers have now missed anywhere between $5k-8k in paychecks. With the slowdown we’ve started seeing in the labor market, it’s no surprise to see this weakness in consumption. The relative weakness will start becoming more apparent as we enter the holiday shopping season.
Super Saturday sans success
The biggest “will they, won’t they” of the last THREE years was supposed to end on Saturday. UK House of Commons met on “Super Saturday” for a vote on Prime Minister Boris Johnson’s Brexit plan. The day was hijacked by an amendment proposed by a member of Johnson’s own party (tbh not surprising, back-stabbing has been the story of Johnson’s political career). The amendment was passed by a majority of votes and effectively withheld the approval of Johnson’s plan.
Moral of the story: It seems like Brexit is getting pushed out to January 31st of next year. What the China trade war is to business growth in the US, Brexit is the same for business in Europe, where economies are already struggling to stay afloat.