In this briefing:
- Differing Sino-US Agendas Undermine Global Growth Outlook
- FLASH: UK Inflation Falling Fast over 2018 Yearend
1. Differing Sino-US Agendas Undermine Global Growth Outlook
The fate of the global economy in 2019 will hinge on the willingness of China and the US to combat decelerating domestic growth via invoking appropriate policy support.
Given current fiscal backdrops, both China and the US have less capacity to ease policy to boost growth compared to the available monetary measures at their disposal.
Pressure is increasing on Beijing to aggressively cut taxes in March to stimulate growth, as well as structurally boosting consumption.
China’s consumers have become increasingly more discerning in their attitude towards foreign brands, partly due to the rise of credible local competitors.
The current economic and financial environment is somewhat reminiscent of 2016 when a deal between the Fed and China averted protracted economic and financial turbulence, but the current China-US nexus makes an accord in 2019 extremely unlikely.
China is unlikely to act again as buyer of last resort for the world economy courtesy of another credit binge, but policy will instead focus on stabilising growth at 6.0%-6.5%.
2. FLASH: UK Inflation Falling Fast over 2018 Yearend
- UK inflation disappointed consensus expectations for the RPI again in Dec-18 with its 0.5pp fall to 2.7% y-o-y (index at 285.6), while the CPI print was in line at 2.1%.
- Upside news in my CPI forecast was from food and airfares while the downside on the RPI was from the housing sector.
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