26 Aug 2019
Philipp Hildebrand, Vice Chairman of BlackRock
“We have a slowdown already, a pretty significant one. What the yield curve and interest rates generally tell us is that the risk of a recession down the line in 2020 are more elevated than they have been in this entire cycle. From a risk perspective, there is a clear signal, the slowdown is already here. The question is whether it leads to something worse.
“Some of what we’re seeing is warranted by fundamentals. Some of it is also just the politics. We have governmental policies in many places around the world, including the US, that give rise to worries and questions about the regime we’ve got, the world order. So we see flight to safety in many cases.
“Confidence works with a lag and a lot of damage has been done already. That’s not to say you can’t correct some of it, but populist policies across the world can’t lead to prosperity. What we have today is that confidence is starting to be undermined. We see it in investment spending. This is starting to hit the economy as a whole and reflect itself in markets. If there were to be a recession, it’s not clear what the policy response would be – the question of being ‘out of ammunition’ adds an additional concern to markets.”
At a time when investors remain nervous about investing in stock markets, our Investor Pulse shows that technology is a means to encourage investment.
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Source: BlackRock Investor Pulse, May 2019
UK inflation (July) - Annual consumer price inflation hit 2.1% in July, up from 2.0% in June. This was ahead of expectations and represented a three-month high. Video games and toys were the main contributors to higher results.1
UK retail sales (July) - Retail sales rose 0.2% by volume in July compared with the previous month. This was better than expectations, which had suggested a small fall. Stronger volumes were supported by strong internet sales, which increased by 6.9% over the previous month, the fastest pace since May 2016.2
US retail sales (July) - US retail sales jumped by the most in four months in July, rising 0.7%. A Reuters poll found economists’ expectations at 0.3%. The consumer continues to be a strong source of support for the US economy.3
Eurozone inflation – Inflation in the eurozone slowed to 1% in July, moving further away from the European central bank’s (ECB) target of 2%. This was a fall from 1.3% in June and from 2.2% a year earlier and makes the likelihood of ECB intervention more likely.4
German economy – The German central bank, the Bundesbank, warned that the country is heading into recession, saying a slump in exports during the summer was likely to continue into the autumn. Demand for cars and industrial equipment has been particularly weak.5
1 UK inflation unexpectedly overshoots BoE target in July, Reuters, August 2019
2 UK retail sales unexpectedly jump in July, Financial Times, August 2019
3 US retail sales beat estimates to show strong consumer spending, Financial Times, August 2019
4 Eurozone inflation slows further; Eurostat, RTE, August 2019
5 Germany likely to head into recession, central bank warns, Guardian, August 2019
German manufacturing purchasing managers indices (PMI) - German PMI is expected to rise to 45.2 from 43.2, but remain solidly in contraction territory. Weakness in the manufacturing sector has been pushing Germany towards recession.6
Eurozone manufacturing and services PMI - Market consensus expects small rises in both manufacturing and services PMI across the Eurozone. 6
US manufacturing PMI – US manufacturing has been weaker, but has so far remained in expansion territory. PMI data is expected to show a rise from 51 from 50.4. 6
6 Week ahead, IG Index, August 2019
The opinions expressed are as of August 2019 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.
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