1. The global economy is slowing down, with growth forecasts being reduced. 2. Trade tensions between the US and China have deepened the slowdown and impacted exports, manufacturing, and investment most significantly. 3. Central banks have responded with interest rate cuts and quantitative easing programs, supporting stock markets after an August sell-off.

1. Global economy in charts*
Q3 2019
Ian Stewart, Debapratim De, Tom Simmons, Peter Ireson & Maximilien Lambertson
Economics & Markets Research, Deloitte, London
*Charts as on 24th September 2019

2. 2
Summary
1. Global slowdown underway
2. Impact of trade tensions greater and more prolonged than expected
3. Exports, manufacturing and investment worst hit
4. Central banks have responded with rate cuts and QE
5. Monetary easing has supported equities, recovering after a sell off in August
6. Consumers remain key driver of activity
7. Slow growth to continue, risks tilted to the downside

3. 3
Continued global slowdown
GDP growth: Actual & IMF forecasts (%)
Post-
crisis
trend 2018 2019 2020
‘11 – ‘17
Advanced
economies
1.8 2.2 1.9 1.7
Emerging
markets
5.0 4.5 4.1 4.7
World 3.6 3.6 3.2 3.5
Emerging
markets
World
Developed
economies
Forecasts
Source: IMF World Economic Outlook Update, July 2019
Synchronised slowdown in developed and emerging markets this year. The IMF’s forecasts shown here look too optimistic
given current economic weakness.

4. 4
Trade tensions escalate
The imposition of further US tariffs on Chinese imports and Chinese retaliation have taken trade growth back to negative
territory.

5. 5
Slump in global manufacturing
The ongoing economic slowdown and US-China trade conflict have hit manufacturing, with activity contracting in several
advanced economies.

6. 6
Manufacturing slowdown and trade war hit German activity
The German economy contracted in the second quarter. The Ifo Business Climate Index, a bellwether for European activity, is
at its lowest level since the euro debt crisis in 2012.

7. 7
Euro area expected to grow at slowest pace in six years
European growth prospects have weakened, with further deterioration in industrial confidence. Consumer confidence has
fared better, supported by a strong labour market.

8. 8
US growth also softening
US growth has held up better than Europe’s but a key industrial sentiment indicator suggests manufacturing activity is at a
three-year low.

9. 9
US yield curve inversion prompts talk of potential recession
The slope of the US yield curve fell into negative territory over the summer (an inversion, which has preceded the last seven
US recessions). The New York Fed now assigns a 38% probability to a US recession in the next 12 months, the highest since
the financial crisis.

10. 10
Chinese slowdown continues
Chinese growth decelerated in the second quarter to its slowest pace since 1992. Exports and imports have contracted due
to the ongoing trade conflict, prompting Chinese authorities to ease monetary policy and allow the yuan to weaken further
against the US dollar. The IMF forecasts Chinese growth to slow to a three-decade low next year.

11. 11
Indian growth has slowed sharply
Growth prospects for India, which had overtaken China as the fastest growing major economy, have sharply deteriorated
over the summer. Defaults by several non-bank lenders have led to a crisis in India’s shadow banking sector. Credit-driven
consumption has slumped, with car sales falling at the fastest pace since data began in 1992.

12. 12
Bond yields negative
Expectations of monetary easing, followed by rate cuts by the Federal Reserve and the ECB, and further quantitative easing
by the latter, have pushed, and are keeping, some government bond yields in negative territory.

13. 13
Monetary easing has supported equities
After falling 6% in August due to an escalation in trade tensions, the S&P500 made up most of its losses, supported by
further easing of policy by the Federal Reserve and the ECB.

14. 14
Labour markets remain tight
Unemployment rates remain at or close to their lowest levels in several decades in many developed economies.

15. 15
UK growth takes a hit
UK GDP growth: Actual and forecast
Year-on-year
growth
Quarter-on-
quarter growth
Forecasts
The UK economy contracted in the second quarter, due to a sharp fall in manufacturing activity. Activity has expanded in July
suggesting growth is likely to return to positive territory in the third quarter.
EU
referendum
Source: Consensus Economics forecasts and Deloitte calculations

16. 16
No-deal Brexit to sharply slow growth but the UK might avoid a prolonged recession
2018
Growth
Forecaster
GDP growth under no-deal Brexit
2019 2020 2021
1.4%
NIESR* 1.0% 0.0% 2.2%
Consensus
Economics**
1.2% 0.5% N/A
* National Institute of Economic and Social Research, August 2019
** Consensus Economics survey of forecasters, June 2019
Impact of no-deal Brexit: Forecasts for GDP growth
under each forecaster’s no-deal assumption (% YoY)
In the event of a no-deal exit from the EU, the independent think tank NIESR* expects UK growth to remain flat in 2020 and
accelerate the following year. If a transition deal were to be struck, it forecasts a modest slowdown in growth from 1.2% this
year to 1.1% in the next.

17. 17
UK corporate risk appetite at ten-year low
The impact of Brexit has so far been concentrated on the UK corporate sector, which has sharply squeezed business
investment in the face of elevated uncertainty.
Source: Deloitte CFO Survey, Q2 2019
Growth in key economic aggregates before and after
the EU referendum (% YoY)

18. 18
Conservatives have opened up a considerable lead over Labour
In September, the Conservative Party opened up a significant lead over Labour. Bookmakers’ odds* suggest a hung
parliament would be the most likely outcome of a potential general election, with the Conservatives winning the most seats.
UK opinion polls: Voting intention (%)
Source: PollBase, Wikipedia and Deloitte calculations
*Paddy Power on 27th September 2019

19. 19
GDP growth (% YoY)
Post-crisis
trend 2018
2019
forecast
2020
forecast
‘11 – ‘17
US 2.1 2.9 2.6 1.9
UK 2.0 1.4 1.3 1.4
Euro area 1.2 1.9 1.3 1.6
Germany 1.9 1.4 0.7 1.7
Japan 1.1 0.8 0.9 0.4
China 7.6 6.6 6.2 6.0
India 7.0 6.8 7.0 7.2
GDP growth in major economies: Actual & IMF forecasts
Source: IMF World Economic Outlook Update, July 2019
The IMF’s forecasts shown here look too optimistic given current economic weakness.

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Contacts
Data for all the charts in this document was sourced from Refinitiv Datastream unless otherwise stated. Charts
as on 24th September 2019.
Ian Stewart
Partner & Chief
Economist
020 7007 9386
istewart@deloitte.co.uk
Debapratim De
Lead Author &
Senior Economist
020 7303 0888
dde@deloitte.co.uk
Tom Simmons
Economic Analyst
020 7303 7370
tsimmons@deloitte.co.uk
Peter Ireson
Economic Analyst
011 7984 1727
pireson@deloitte.co.uk
Maximilien Lambertson
Economic Analyst
020 7303 5316
mlambertson@deloitte.co.uk