The report released by the International Monetary Fund (IMF) on Tuesday October 9th 2018 and the upcoming Gross Domestic Product (GDP) data release in the United Kingdom (UK) tomorrow are topics of conversation among financial analysts today.  The IMF’s “World Economic Outlook” report which is published twice a year in April and October said that the Fund will be cutting its global growth forecast because of the continued clash between the United States and China. 

“World Economic Outlook” report by IMF

The IMF’s analysts noted that the global economy is now expected to grow by 3.7% during this year and by another 3.7% during 2019. The new estimates are 0.2% lower than the forecast published in April 2018. The reason behind the downgrade as the IMF’s economists suggested is the trade tension between the US, China and other important trading partners. 

Maurice Obstfeld, the IMF’s chief economist, said in a speech that earlier growth projections appeared to be too optimistic as trade tensions have become more intense in the last few weeks. “The impacts of trade policy and uncertainty are becoming evident at the macroeconomic level, while anecdotal evidence accumulates on the resulting harm to companies. Trade policy reflects politics, and politics remain unsettled in several countries, posing further risks,” he said. Maurice Obstfeld added that “two major regional trade arrangements are in flux — North Atlantic Financial Trade Agreement (NAFTA) and the European Union (EU). US tariffs on China, and more broadly on auto and auto part imports, may disrupt established supply chains, especially if met by retaliation.” 

In its report, the IMF suggested that the two largest economies involved in the trade war, China and the US, are expected to grow slower than initially thought. More specific the US economy is likely to grow by 2.9% in 2018 and 2.5% in 2019, while the Chinese economy is anticipated to achieve a 6.6% rate of growth during 2018 which will slow to 6.2% in 2019. Apart from the trade tensions, the “World Economic Outlook” report focused on emerging markets that have come under strong pressure in recent months. As noted in the IMF’s report economies such as Turkey’s and Argentina’s are experiencing massive capital outflows as investors prefer to take advantage of the rising interest rates back in the US. 

UK GDP growth in August 2018

In the UK the Office for National Statistics (ONS) is expected to publish a series of financial data regarding the country’s economy. The report is going to include the UK’s GDP rate of growth as it was recorded by the ONS services during August 2018. Economists suggest that the UK’s GDP grew by 0.1% on a month-to-month basis, slightly lower than the 0.3% rate recorded in July 2018. 

Financial analysts will also focus on data regarding the industrial and manufacturing production in the UK in August 2018. Industrial production is likely to come in at 0.1% on a monthly basis, matching July’s 2018 reading. Manufacturing production is expected to have grown by 1.1% on an annualised basis, matching the rate of growth recorded in July 2018. 

In other news, the IMF in its latest “World Economic Outlook” argued that the UK’s government has the flexibility to boost public spending as the country is preparing for its exit from the EU. IMF’s analysts suggest that “the fiscal targets—which envisage the cyclically adjusted public sector deficit falling below 2% of GDP and public debt beginning to decline by 2020/2021—provide an anchor for medium-term objectives while allowing for flexibility in the short term. The pace of fiscal consolidation can be eased if risks materialize and growth slows sharply.”

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