Less than a month ago in the imposing setting of the IMF’s HQ2 building in Washington DC, Gita Gopinath, its new chief economist, had a bleak message for the world. Disappointing data had led the fund to cut its forecasts for global growth yet again, any recovery penciled in for the second half of this year was “precarious” and this toxic combination meant that spring 2019 was a “delicate moment” for the global economy.
Less than a month later the IMF’s message appears to have been far too gloomy. Over the past few days the three largest economic blocs in the world – the EU, China and the US, comprising almost half of global output – have published their first quarter estimates and all three have been stronger than expected. On the latest data, at least, the slowdown of late 2018 has already ended. In Europe, the single currency area grew 0-4 percent in the first quarter,
according to preliminary estimates, significantly higher than expected. Italy has emerged from recession and Germany, which has not published its figures yet, is also likely to show improved performance. Outside the eurozone growth has been stronger still, with the EU economy as a whole growing at an above-average rate of 0.5 percent. The Bank of England last week upgraded its forecast for the UK’s performance this year from 1.2 percent growth to 1.5 percent, with governor Mark Carney saying the global outlook had become “more benign”.
Europe’s above-trend performance has been eclipsed by even stronger data coming from the US economy. First quarter growth of o.8 percent, the US reports this as 3.2 percent on an annualized basis, was far higher than expected for a quarter that started with a prolonged government shutdown. Although the details suggested that strength might be partly temporary, the figures still indicated considerable momentum. In China growth stabilized at an annual rate of 6-4 percent and more up-to date figures from industry suggested that the government’s infrastructure stimulus was having its desired effect, with industrial production rising at an annual rate of 8.5 percent in March – much stronger than analysts had expected.