Fears over the state of the global economy are intensifying as a series of key data points suggest growth is stalling.

On 8 March the influential US non-farm payrolls figures came in miles behind expectations. Just 20,000 new jobs were created across America in February against a consensus forecast for 180,000. This was also down sharply from 311,000 in January.

The monthly jobs report is widely watched by the markets as it offers a snapshot of the health of the world’s largest economy. Chinese trade figures for February also sparked alarm as exports slumped by 20%.

There were potential mitigating factors behind both shocks. US job creation was potentially a victim of the government shutdown and the impact of bad weather and China was likely to have suffered from the tariffs on exports to America. It is also worth noting that wage growth for Americans actually accelerated.

Beyond the world’s two largest economies there are other worrying signs. On 11 March it emerged that German industrial production had unexpectedly fallen 0.8% in January, Japanese tool orders dropped 29% year-on-year in February to their lowest level since 2009 and Turkey officially entered recession for the first time in a decade.

And after a strong start to the year for equities, investment bank Morgan Stanley believes investors are ‘overpricing’ a Goldilocks economic backdrop, where growth is neither too hot (leading to inflation) or too cold (resulting in a slowdown).

‘We think the market is too confident in a central scenario where growth stabilises, inflationary pressure is absent and G3 (US, Japan, EU) policy is on hold for the next 24 months,’ it says.

Reading too much into individual economic updates can be a mistake but it will be important to keep a close eye on some of these trends as we move through 2019.

BREXIT LATEST

As we went to press Theresa May’s Brexit deal had suffered a second heavy defeat in the House of Commons. MPs were widely expected to vote against a no-deal Brexit and for an extension to Article 50.

However, amid signs attitudes on the European side may be hardening, it is worth pointing out that an extension requires the unanimous support of all members of the EU. In order to get this support, there will almost certainly need to be a credible justification.

The default position is that the country exits the EU in a fortnight, something most observers believe is still not being priced in by the market.

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