World Economic Outlook

After strong growth in 2017 and early 2018, global
economic activity slowed notably in the second half
of last year, reflecting a confluence of factors affecting
major economies. China’s growth declined following
a combination of needed regulatory tightening to rein
in shadow banking and an increase in trade tensions
with the United States. The euro area economy lost
more momentum than expected as consumer and
business confidence weakened and car production in
Germany was disrupted by the introduction of new
emission standards; investment dropped in Italy as
sovereign spreads widened; and external demand,
especially from emerging Asia, softened. Elsewhere,
natural disasters hurt activity in Japan. Trade tensions
increasingly took a toll on business confidence and, so,
financial market sentiment worsened, with financial
conditions tightening for vulnerable emerging markets
in the spring of 2018 and then in advanced economies
later in the year, weighing on global demand. Conditions
have eased in 2019 as the US Federal Reserve
signaled a more accommodative monetary policy
stance and markets became more optimistic about a
US–China trade deal, but they remain slightly more
restrictive than in the fall.