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Trade policy risk has now clearly overtaken economic risk as the biggest threat to the global economy’s current growth momentum.
Our leading economic indicators, including our US and global consumer confidence measures, at The Conference Board continue to point to strong global growth for the remainder of this year. While there is some moderation observable in key business confidence indicators and export data for some regions (especially Europe and some emerging markets), those moderations are mostly benign and provide no signal of heightened recession risk. Inflationary pressures are becoming a bigger concern for emerging markets though, as the US dollar has recently been strengthening.
The uncertainty about trade policy and a possible escalation in tit-for-tat tariffs or quota increases are also unlikely to push the global economy into reverse immediately. However, uncertainty could exacerbate a slowdown in global growth if businesses hold off on investment and hiring. Policy risks are therefore more likely to bring recession risks forward to some time in 2019.