Global | Growth gained momentum in early 2019, but protectionism is a threat

Summary

Up to March hard data was mixed: retail sales are still strong, but contrast with the weakness of industrial sector and global trade. Soft data slid again in April: manufacturing confidence remains gloomy, while services PMIs fell in DM and EM increasing concerns about contagion effects from trade and manufacturing.

Key points

• Key points:
• Our BBVA-GAIN model shows a slight deceleration in global growth in 2Q19 to 0.9% from a positive 1% in 1Q19
• The escalation of US-China trade war (tariff increases and technological disputes) could weigh markedly on China’s GDP growth if they are not reversed, and would also the US and the EZ, eventually could negatively affect the good growth performance so far this year. However, this negative impact could be offset in the short-term by further expansionary fiscal and monetary policies (mostly in China).
• The rise in oil prices could shape headline inflation in coming months, likely delaying the expected moderation in annual rates, but core inflation should remain low as to maintain the dovish stance of central banks in a more uncertainty global outlook.

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