Uncertainty in Italy is just the latest indication that hopes for 2018 were overblownby George Magnus / May 29, 2018 / Leave a comment
At the beginning of 2018, there was a distinct and welcome mood of optimism about the prospects for the global economy. IMF Chief Economist Maurice Obstfeld noted positive surprises in China and in advanced economies, including in Europe. He was by no means alone in framing a consensus articulated also by banks, global consulting firms and governments. Your scribe wasn’t so sure as you can see here, here, and here. As we approach the half-way stage of the year, the consensus has become rather more sober. Has a synchronised global recovery become a desynchronised and faltering expansion?
Some indicators of the health of the world economy have definitely raised a few eyebrows. The Baltic Dry Index, which reflects shipping activity, has fallen sharply this year following an erratic surge in 2016-2017. The International Air Traffic Association’s index of freight tonne kilometres, which reflects cargo volumes by weight and distance, was at its lowest level for two years in March.
Crude oil prices have been on a bit of a tear, with Brent crude, for example, rising from just over $60 a barrel at the start of the year to just under $80 a barrel. This probably reflects supply restrictions by Opec countries and Russia, and shortfalls in Venezuelan output, more than surging demand. Yet higher prices may dampen global demand, unless Opec agrees to tap (limited) unused capacity at its June me…