Growth Prospects and Challenges Ahead for the U.S., U.K., Eurozone, China, and Japan


  • Ailing Economies

A new risk, the coronavirus, is clouding the near-term outlook for the global economy. The outbreak is sending ripples through global supply chains and disrupting businesses. Those markets with strong economic linkages to China are the ones facing the biggest impairment, as the flow of goods and services has come to a virtual halt.

In the best case, the economic impact will be high but short-lived. However, if China remains in lockdown and infections continue to rise, the shock to the rest of the world could be lasting and significant. Meanwhile, other important matters (Brexit negotiations and U.S.-China trade tensions, to name two) are far from settled. The ongoing uncertainties will continue to weigh on economic prospects for a good portion of 2020. As a result, we have downgraded our growth outlook for all major economies.

Following are our thoughts on how the world’s major markets will fare during the balance of the year.

United States

  • Two near-term shocks are weighing on the U.S. economy. Though geographically remote from China, businesses in the U.S. will suffer from slower investment and delayed inventory growth caused by the coronavirus. In addition, the halt to production of the Boeing 737 MAX is creating a substantial disruption as workers and planes are idled. We expect growth to resume in the second half as these situations run their course.
  • Fourth-quarter gross domestic product (GDP) showed continued growth with unsteady support. Previously strong consumer spending returned to normal levels, while business investment contracted for the third consecutive quarter. Net exports grew due to a sharp decline in imports, consistent with slower consumption. We believe positive consumer sentiment and supportive monetary policy will keep the economy growing, but at a slower rate than recent years.