IHS Markit Top 10 economic predictions: Global slowdown ahead in 2019 on trade threats

Global economic growth will edge down to 3% in 2019 from 3.2% in 2018, according to the annual Top 10 Economic Predictions released by business information provider IHS Markit. While global growth will continue to decelerate, the economy will also become increasingly vulnerable to shocks.

“Policy mistakes remain the biggest threats to global growth in 2019 and beyond,” said IHS Markit Chief Economist Nariman Behravesh. “Simmering trade conflicts are dangerous, not because they have done damage so far – they haven’t – but because they could easily escalate. At the same time, the sell-off in equity and commodity markets, on top of the gradual removal of stimuli by some central banks, means that financial conditions worldwide are tightening. The good news is that the probability of a single policy event seriously hurting global growth in 2019 is still relatively low.”

The U.S. economy is expected to grow at a rate of at 2.5% in 2019, less than the 2.9% growth seen in 2018, but still indicative of solid economic fundamentals. The new year will see countervailing pressures on U.S. growth: on the downside, the rising dollar, tightening credit conditions and higher tariffs could still hurt growth; on the upside, low interest rates, fiscal stimulus and constrained oil prices bode well for the U.S. economy.

IHS Markit also predicts Europe’s economic expansion will slow even further, declining to 1.5% in 2019. Several adverse economic and political factors are behind the continued deceleration, including less accommodative credit conditions, the negative impact of trade tensions on the manufacturing sector and exports, and the appreciation of the euro against most currencies except the U.S. dollar.

Political risks have also increased significantly, contributing to the four-year low in business sentiment illustrated by the PMI by IHS Markit. Lastly, the continuing turmoil around Brexit will hurt UK growth, which will fall from 1.3% in 2018 to 1.1% in 2019.

As predicted in last year’s edition of the Top 10 Economic Predictions, global growth is on trend to expand at a rate of 3.2% in 2018. In all, eight out of 10 predictions by IHS Markit for 2018 were on the mark, with one partially on the mark.

In early November, IHS Markit economists predicted at an economic forecast summit hosted by the St. Louis Fed in Little Rock that the nation’s tight labor market and other events will cause the U.S. GDP growth to peak at 3.1% in 2018, fall to 2.5% in 2019, and slide below 2% in 2020 and beyond.