World Economic Prospects Monthly.

Overview: Recession in 2020 is still far from inevitable ▀ The recent run of soft survey data suggests that an imminent rebound in global GDP growth is unlikely and that concerns about slowing growth and trade tensions may now be taking a toll on service sector activity. We still expect world GDP growth to slow into early next year; for both 2019 and 2020, growth is forecast to average 2.5%, the weakest since 2009.▀ Although a number of closely-watched measures of business activity such as the US ISMs and the eurozone PMIs struck a distinctly downbeat tone in September, the broader global composite PMI fell only slightly and has been little changed since June. We see global GDP growth easing into early‐2020, but it is unlikely to plunge.▀ The risk of a global recession in 2020 – defined as world GDP growth falling below annual population growth of just over 1% – has risen and we now attach a 30% chance to such an outcome. But our baseline view is that a recession will be avoided.▀ There is growing evidence that uncertainty is prompting firms to scale back plans to raise capital spending and take on additional workers, but these indicators still point to a further modest loss of momentum rather than an imminent recession.▀ Meanwhile, the very limited response of oil prices to Saudi Arabia's recent supply disruption points to fairly subdued inflation ahead. This in turn will support household incomes while providing scope for further central bank policy loosening.▀ We think that a combination of policy loosening by central banks around the world, keeping financial conditions highly accommodative, and the absence of any further dramatic escalation in trade tensions should be enough to ensure that the current downturn turns out to be more of a mini‐slowdown within the economic cycle.▀ Next year, we expect global GDP growth to remain around 2.5%. But while this is a long way from recession territory, it would still leave growth very subdued, even by post‐global financial crisis standards, and the risks lie to the downside. [ABSTRACT FROM AUTHOR]

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