Overview
The US GEAR edged up to 4.1 per cent on the month, reflected in the very strong second quarter GDP print, buoyant manufacturing data and confidence among small businesses.
Tentative signs of weakness in the housing and consumer sectors are worth monitoring, but do not materially darken the outlook. Growth is above trend and shows few signs of slowing in the second half of the year.
EM stabilisation
Emerging market GEARs appear to be stabilising. India, at 7.7 per cent, is strong relative to many previous years, while Mexico, at 2 per cent, is showing signs of improvement from earlier soft readings. Central and Eastern European GEAR is back at a supercharged 5.1 per cent, recovering from its April low.
However, some key economies are showing vulnerabilities. The Korea GEAR, at 2.9 per cent, is at an 18-month low, after weak employment data. The China GEAR, while still higher than that of most countries, dropped for the second month in a row to hit 7.1 per cent, representing a 100 basis-point decline from the highs. The Turkey GEAR turned negative for the first time since 2016’s failed coup, dropping to -0.7 per cent.
In the Eurozone, the GEAR fell back slightly to 2.4 per cent. The measure is well below the levels seen in 2017. But while the prospect of an economic acceleration is receding, the bloc could see solid growth if the data were to stabilise at current levels. Italy and France, both below 2 per cent, remain weak, while Germany and Spain, both around 3 per cent, have held up better than their peers.
The UK GEAR remained flat at 2.2 per cent, recovering after a poor start to 2018. We expect activity to remain muted in coming quarters, given the widespread political uncertainty.
