World GDP growth stalled in Q2 2019 at an estimated +2.4% q/q annualized, marking the third quarter in a row below +3% (a sequence last seen in 2015). The August global manufacturing PMI signaled further weakness ahead, making a fourth consecutive quarter below +3% in Q3 a likely scenario (first time since 2011). The main trigger of that weakness was the global merchandise trade recession (three consecutive quarters of decreasing trade flows since Q4 2018) and its deep impact on key exporters’ growth in Europe (Germany, Italy), Asia (South Korea, Hong Kong, Singapore) and elsewhere (e.g. Mexico, Morocco). Now that the trade games between the U.S. and China have turned into a trade feud with a higher level of trade tariffs, further adverse effects on growth will be hard to avoid. Many market-based indicators (e.g. long-term yields, ratio of copper to gold prices) suggest low growth for the next quarters to come, with the potential to lengthen the growth fatigue to the whole of 2020, which would make it the longest period of below +3% growth since 1991-1993.
