The latest activity data suggest that economic growth will slow to just 1.0% annualised in the fourth quarter, from 1.9% in the third, but there are growing hopes that may prove to be the nadir. Much of that slowdown is being driven by firms running down their inventories, which may have only a few more months to run. The downside risks to the outlook have begun to fade, or at least look set to get no worse, with a partial truce in the trade war with China still likely in the coming months and the incoming global data beginning to stabilise. Moreover, there are signs that the Fed’s rate cuts are feeding through to stronger demand in the housing sector, though with firms cautious and credit conditions still being tightened, we expect the eventual recovery when it does come to be gradual.
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