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Global Economic Outlook

Global Economic Outlook - November 2019

The U.S. and China are making progress towards a limited trade deal, and Brexit is now a step closer to resolution.


  • Better Visibility, But No Sunshine Yet

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After several quarters of gridlock, it would appear progress is finally being made on key issues clouding the global economic outlook. The U.S. and China are inching closer to signing “phase one” of a trade deal by not only pausing tariff escalation but also potentially rolling back some of the recently applied tariffs. Brexit is now a step closer to resolution, subject to the outcome of the December 12 elections. In the eurozone, there are tentative signs that the industrial sector is bottoming out. 

That said, the forecast is still cloudy. U.S./China trade negotiations are far from complete, and there are a range of possible outcomes for the elections in the U.K. In our base case, economic activity will remain subdued but sustained in major economies as tariffs and trade tensions continue to sully the environment. Central banks in advanced economies are expected to be on hold for the foreseeable future. 

Here are our views on the world’s major economic blocks.

United States

  • At its October meeting, the Federal Open Market Committee (FOMC) lowered the federal funds target rate by 0.25%, the third reduction since the summer. In comments after the meeting, Fed Chair Jerome Powell said rates are now “in a good place,” a clear signal that more cuts are not anticipated. Further reductions would require broad economic underperformance, while a return to hikes would require sustained, above-target inflation. Our base case is a prolonged holding pattern.
  • U.S. economic news has taken a generally favorable turn. Gross domestic product (GDP) grew by an annualized 1.9% in the third quarter, an outperformance driven by consumer spending. Unemployment is holding low at 3.6%, with persistent job creation and rising labor force participation. But trade tensions continue to weigh on business sentiment, as reflected in two quarters of negative fixed investment and three months of the manufacturing purchasing managers’ index showing contraction.


  • The eurozone economy continues to remain in a weak spot but avoided contraction in the third quarter by growing at a lackluster real rate of 0.2%. Though recent German data (exports and factory orders) delivered a positive surprise, the chances of Germany experiencing recession are high. The eurozone needs a fiscal boost before external weaknesses spill over to its resilient domestic sector. 
  • Christine Lagarde officially took charge of the European Central Bank (ECB) at the start of the month, amid an uncertain economic outlook and a high level of internal dissent. With the ECB running out of tools and monetary policy losing potency, we believe the central bank is done for now.  Lagarde is likely to press members to capitalize on low (or negative) rates by expanding fiscal policy.         

United Kingdom

  • Brexit is finally edging forward as parliament voted in principle for the government’s modified withdrawal deal. That said, parliament not only rejected the government’s effort to compress scrutiny of the Brexit bill but also voted in favor of a general election, to be held on December 12, 2019. We expect a Boris Johnson-led government to take Brexit (under the terms of the currently offered deal) to an orderly conclusion before January 31, 2020 deadline. But political outcomes are hard to predict, and Brexit won’t be done until it’s done.
  • The British economy, particularly business investment, continues to be battered by weaker global growth and Brexit-related uncertainty. We are hopeful that progress on Brexit will deliver some positive impetus to the British economy next year, giving no need for the Bank of England to act.  A rate reduction remains unlikely, but two members of the Monetary Policy Committee voted for an interest rate cut at November’s meeting, the first split vote since June 2018.


  • Growth prospects for Japan remain dim amid the more subdued external environment. The U.S.-Japan bilateral trade agreement should remove some uncertainties, but it is unlikely to provide any major push to the economy. Domestically, last month’s consumption tax hike will continue to weigh on growth in the near term, but won’t cause a recession, thanks to offsetting policy measures. 
  • The Bank of Japan (BoJ) adjusted its forward guidance by moving away from tying policy to a specific time frame and signaling lower rates if inflation weakens further. The central bank also didn’t rule out the possibility of increasing asset purchase amounts and the money supply. Pressure will continue to mount on the BoJ to ease further, but we expect it to remain on hold unless the economy slips into recession or the yen strengthens notably.


  • Fear of economic fallout has likely prompted the U.S. and China to seek a truce and make progress towards a limited trade deal. Though the agreement will offer some respite, most tariffs are likely to remain in place through 2020, and many core issues will remain unresolved. “Phase one” will likely be one among many, but is expected to ease some pressure on the yuan.
  • Amid external headwinds and the narrow impact of policy stimulus, the Chinese economy continues to lose steam. Improved sentiment around trade talks will help reduce the downside risks, but domestic imbalances and weaker external demand will continue to drag growth down.  Policymakers will likely continue to deploy more stimulus measures to stabilize growth.

Global Economic Forecast – November 2019

GEO 11/12/19 Chart
Carl R. Tannenbaum portrait

Carl R. Tannenbaum

Chief Economist
Ryan James Boyle portrait

Ryan James Boyle

Chief U.S. Economist
Vaibhav Tandon portrait

Vaibhav Tandon

Chief International Economist


Growth Prospects and Challenges Ahead for the U.S., U.K., Eurozone, China, and Japan.

The sudden escalation of trade tensions that have originated from Washington is casting doubt over the outlook. If the escalation continues, the global economy will continue to decelerate and recession risks will rise.

A change to global uncertainty will require a concrete settlement of key issues . While downside risks to the global outlook have not increased, they haven’t declined, either.

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