QNB Says Cyclical Indicators Point to Global Economic Slowdown

Doha, January 05 (QNA) - QNB said Saturday in its weekly analysis that cyclical indicators points to a global slowdown in economic growth. The Qatari bank said in its analysis that the first week of 2019 sees political risks persisting, and previous optimism being washed out by material negative changes in key equity markets. While the bank acknowledged that GDP remains the most important measure to gauge economic performance, it is not very timely or even accurate, as official estimates are only released quarterly with a lag and the initial readings are often revised at a later stage. "Hence, other key indicators have to be waged in order to provide a reliable snapshot of the global economy in a timely fashion. In other words, as official GDP numbers are only released with a lag or after the economic cycle already moved forward," the bank said. QNB said that their analysis builds a picture of the global economic momentum based on manufacturing Purchasing Managers Indices (PMIs) and trade volumes of early-reporting countries. Manufacturing PMIs are diffusion indexes based on monthly business surveys in which respondents point whether variables such as output and employment have improved or deteriorated in relation to the previous month, readings above 50 signals to expansions and below 50 to contractions. "PMIs are the most accurate timely indicators of the state of global demand, and manufacturing PMIs have been the best gauge for global activity in recent years," the report said. According to the IHS Markit Global Manufacturing PMI, economic activity has been slowing down since the beginning of 2018 and further weakness is estimated to have taken place in Q4 2018 and to continue in Q1 2019. The bank acknowledged that the global economy's manufacturing PMI numbers for December 2018 remain comfortably within expansion territory at 51.5; it is considerably below the 54.5 reading of December 2017. QNB's report said that the country and region-based manufacturing PMIs are pointing to a continuation of the recent trend of global economic growth divergence. The U.S. manufacturing PMI numbers remain strong, Euro area numbers have fallen markedly to close to 3-year lows. In the case of the US, subcomponents of the PMI are still pointing to strong new orders and relatively low inventories, which suggest that activity, should continue to run at a reasonable pace over the short-term. The analysis also highlighted the importance of exports of early-reporting and highly-open economies of East Asia (Japan, South Korea, Singapore and Taiwan) as a gauge of global demand. When it comes to this indicator, a slowdown is also being signaled as 3-month average y/y export growth softens from two digits in February 2017-February 2018 to 4.8% in November 2018. The bank concluded by saying that these cyclical indicators demonstrate that the global economy has already peaked and is now slowing further into 2019. (QNA)