Sentiment sours on escalation of trade war

Sentiment regarding the near-term prospects for the global economy has soured over the past week or two, triggered in part by the escalation of the US-China trade war. Indeed, there are increasing signs – such as the slowdown in investment growth in many countries over the past year – that the trade war is taking its toll. We had already expected tensions to re-ignite (albeit not quite this quickly) and this was one reason for our below-consensus forecast for global economic growth over the next year or two. That said, as things stand, fears that the global economy is heading towards a recession seem overdone, with some recent gloomy economic data balanced by other more positive figures. Indeed, while the industrial downturn has continued to deepen in several major economies, household consumption growth generally remains robust and investment and employment intentions have begun to stabilise in many cases.