The “synchronized global slowdown” narrative is gathering momentum.
Blame the weather and cars, respectively, but both the Japanese and German economies contracted in the third quarter just as the world begins to begrudgingly come to terms with the reality that the halcyon days of synchronous global growth are behind us.
The German economy contracted in Q3 for the first time since 2015, with GDP shrinking 0.2%, worse than estimates, and while the slowdown was expected, the timing leaves something to be desired.
The country’s Economy Ministry was quick to play down the “blip.” “The expansion of the German economy was only interrupted in the third quarter”, the ministry said, adding that “indicators for manufacturing and the overall economy, as well as the development in the export environment” suggest the expansion will “continue again in Q4.”
Similarly, Economy Minister Peter Altmaier told CNBC that he’s “not very much concerned because the third quarter was very much influenced by specific problems of the car manufacturing industries.”
Still, with China’s economy decelerating and the effects of fiscal stimulus set to wane in the U.S., a downturn in Germany would be highly disconcerting.
Meanwhile, in Japan, the economy shrank 0.3% QoQ, inline with estimates.
It’s not all bad news on Wednesday. Reports that the Trump administration will (for now) hold fire on car tariffs is good news for everyone and while retail sales in China missed estimates, IP and FAI were reasonably solid, considering the circumstances.
The overarching narrative, though, is one of consternation as investors worry that “rumors” of a synchronized global slowdown are not in fact “rumors”.
Reports of “Goldilocks'” demise are not greatly exaggerated.
Little wonder, then, that 44% of investors polled in BofAML’s Global Fund Manager survey expect global growth to decelerate in the next 12 months.
As you can see, that’s the worst outlook on the global economy since November 2008.