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Global Economics Monthly Review

September 12, 2018


Global outlook: growing uncertainty may weigh on global growth in the short-medium term.


  • Recently released data on economic activity attest to continuing growth. However, leading indicators, such as new orders, PMI, and other sentiment indices, point to some moderation in growth rates in the short-run. We expect economic growth to somewhat slow in the third quarter, due to base effects, after accelerating in the previous quarter in some major economies, including the US, UK, Japan, India, China, and some of the eurozone economies, including Germany and the Netherlands.


  • Growth continues to be driven mainly by improvement in domestic demand, while data on trade activity point to further softening, partly due to growing uncertainty regarding US trade policy. Based on data published by the CPB Netherlands Bureau, global trade significantly moderated in the second quarter compared to the previous one, in tandem with a deterioration in business expectations (chart 1).


  • The uncertainty regarding US trade policy may weigh both directly on the global economy through softening investment and production intentions, and also indirectly, through deterioration in sentiment in the financial markets (chart 2).


  • Recently, there have been some additional developments and news about US trade policy. Recently, a preliminary deal between the US and Mexico has been reached on how to renew NAFTA, with the two countries agreeing on key issues concerning the automobile sector, intellectual property rights, labor, and more. The next step would be to re-engage Canada to reform a new NAFTA deal. In addition, the US is expected to announce soon whether it will impose additional tariffs on a further US$200bn of imports from China, and consider tariffs on an additional US$267bn of Chinese goods if China will retaliate. On top of all that, the president of the US, Donald Trump, remarked recently that he was prepared to pull the US out of the WTO. The uncertainty regarding trade policy may continue to weigh on economic sentiment.


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