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Published On: Mon, May 6th, 2019

Economic Expectancy Remains Low Despite Better Chinese Exports

Although financial markets are not pricing in any negative outcome at the present time, with live stock trading favored by the positive risk mood, 2019 could be tumultuous year due to several ongoing risk factors that might dampen the economic performance.

IMF cuts economic outlook

On April 9th, the International Monetary Fund announced it decided to cut its 2019 global economic growth forecast by 0.2% from its January outlook. The fund now expects the economy to grow at 3.3% this year, with events like Brexit and the ongoing trade tensions between the US and China, as some of the most important negative factors.

Business activity, stock trading and all financial markets are now considered too near the end of a short-term economic cycle, which raises questions over the projected performance of the global economy.

Risks to the downside persist, as we can see tensions between the US and the EU emerging, also related to trade practices. The only supportive factor comes from major central banks, which had shifted to a more dovish stance, as they acknowledge the risks waiting on the horizon.

photo/ screenshot YouTube

Chinese exports rise

Another news that sparked optimism came from China, which had announced its trade numbers on April 12th. According to the release, Chinese exports rose by 14.2% in March, beating the 7.3% forecast by a large. Trade balance figures came at $32.65 billion, as imports contracted by 7.6%.

Even though financial markets cheered the results, some analysts continue to remain skeptical. They say the rebound in exports comes after weak economic activity due to the Chinese New Year. This may be just a seasonal reaction of the data, which puts further pressure on the numbers pending this month.

The PBOC had also embarked on an easing stance, after deciding to cut the RRR rate earlier this year. Further cuts had been promised, if the economic activity will require it, as the Chinese state aims to keep the economic expansion above 6% in 2019.

Despite the stimulus from central banks, which might further revive economic activity in the second part of 2019, progress on the issues mentioned at the beginning needs to be made. China and the US are still struggling to find common ground in their dispute, while the British Parliament did not manage to agree on a solution to leave the European Union. As long as uncertainty will continue to weight, poor economic outlook will extend into 2020.

Author: Lee Sadawski

About the Author

- Outside contributors to the Dispatch are always welcome to offer their unique voices, contradictory opinions or presentation of information not included on the site.

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