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The Global Economy’s Uncertain Future

At this time last year, the global economy was experiencing strong, widespread growth, with even the long-stagnant European Union staging a robust recovery. But with key indicators of trade and investment now weakening, a new crisis – not least a global trade war – could quickly bring the global upturn to a halt.

LONDON – At the start of 2018, most of the world economy was experiencing a synchronized cyclical recovery that seemed to herald a longer period of sustainable growth and an end to the decade-long hangover from the 2008 slump. Despite the shock of Brexit, storm clouds over the Middle East and Korean Peninsula, and US President Donald Trump’s unpredictable behavior, rising investment and wages, alongside falling rates of unemployment, appeared to be in the offing.

Yet, as I warned in January, “the global mood [had] shifted from fear about political risks to obliviousness, even though many such risks still loom large.” Moreover, while my preferred global indicators were all looking up, I worried about whether that would continue after the first half of 2018, given foreseeable complications such as monetary-policy tightening across advanced economies, especially in the US.

Lo and behold, we are now halfway through 2018, and some of those same indicators are no longer looking quite so rosy. While the US Institute for Supply Management’s June Purchasing Managers’ Index (PMI) remains very strong, other comparable surveys around the world are not nearly as robust as they were six months ago. Most important, business activity has slowed in both China and Europe.

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