Global Economy In For ‘Dull’ Growth In 2019, Not Recession

The global economy is definitely slowing, partly on account of Trump’s trade war, but won’t fall into an economic recession this year, estimates global asset management group Janus Henderson Investors.

Jane Shoemake, investment director at Janus Henderson said the global economy is about to enter a period of "dull, low" growth but the risk of an outright recession remains small. The firm’s assessment jibes with that of many economists and business leaders who agree global economic growth is decelerating.

On the other hand, the analyst said some government policymakers still hold out hope for a soft landing rather than a full-blown recession.

"There is definitely a slowdown in the momentum of the global economy. I don't think the economy is going to be as strong as it was last year," according to Jane Shoemake, investment director of global equity income at Janus Henderson.

"Our central forecast is not for a recession…It is just for dull, low growth.”

Shoemake noted that economic growth in Europe has been a "real disappointment." She also said the widening economic downturn in China, the world's second-largest economy, has increased concerns of a global recession.

Last week, Janus Henderson's Alex Crooke said it’s hard to see the signs of excess that typically precede global economic recessions, such as the ones that heralded the Great Recession of 2008.

There has been no sharp rise in bank lending to business firms and consumers. Takeover activity remains subdued while corporate capital expenditures are only just beginning to recover.

In addition, inflation remains tame while interest rates remain low. All these signs are contradictory to the classic indicators of a looming global recession.

On the other hand, stock markets fell sharply during much of 2018. All three main indices on Wall Street entered bear market territory in 2018 in reaction to fears of an imminent economic slowdown.

The more sanguine view of the global economy by Janus Henderson, which was founded only in 2017, contrasts sharply with that of Nobel Prize-winning economist Paul Krugman.

Krugman last week warned there is a significant chance the world economy is headed for a recession either later this year or early next year. Krugman believes there is "quite a good chance" of a recession in 2019. He said he’s worried economic policymakers in governments "do not have an effective response" if the economy slows down

The European Commission last week released data estimating euro zone growth will decelerate to 1.3 percent this year from 1.9 percent in 2018. Previous estimates were for a 1.9 percent growth this year and 1.7 percent in 2020. Growth in the euro zone, however, is expected to rebound to 1.6 percent in 2020.