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Gradual slowdown more likely than a slump as risks grow

The sizeable and broad-based nature of the recent falls in the PMIs suggests that the co-ordinated acceleration in global GDP growth perhaps has run its course. But this is consistent with our forecast that Q1 would prove the high-water mark for global GDP growth, an assessment which pre-dated the recent slowdown. The key issue is how quickly will growth slow.

Past experience shows that co-ordinated slowdowns in the US and eurozone PMIs are often associated with only a mild easing in GDP growth. Even so, our prior forecast for global GDP growth to slow from 3.3% in Q1 to 3.1% by year end and to remain above 3% through most of 2019 now seems a bit too optimistic, due to ongoing protectionism issues, events in Iran and the related oil price rise. We have downgraded our 2018 and 2019 global GDP growth forecasts to 3.1% and 2.9% respectively (from 3.2% and 3.0% previously).

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