March is shaping up as pivotal for the world economy.
The coming weeks are set to offer clarity on a US-China trade deal, Britain’s fate within the EU and any signs that China’s economy is turning around. At the same time, US President Donald Trump is mulling a report that may lead him to place tariffs on European and Japanese cars, while the Federal Reserve, ECB and Bank of Japan will decide policy. And the list goes on.
The US is eyeing a summit as soon as mid-March between Trump and his Chinese counterpart, President Xi Jinping, with White House economic adviser Larry Kudlow hailing a potentially “historic deal.” If an agreement is reached, the relief may be short-lived if Britain crashes out of the EU on March 29 without a divorce deal, compounding a broader slowdown across the region.
March is also the month for China’s annual National People’s Congress, when the rubber-stamp parliament will sign off on the government’s economic plan for the year.
The centrepiece announcement will be the annual growth target. Some economists expect China to set a lower growth target of either about 6%, or 6-6.5% — down from around 6.5% for the past two years.
Key Chinese data will also be released over coming weeks, indicating whether or not the world’s second-largest economy is responding to policy easing after months of stimulus.
“March data will need to start showing China’s economy is recovering,” said Alicia Garcia Herrero, chief Asia Pacific economist at Natixis in Hong Kong. “If not, we should start worrying.”
How events play out will dictate investor sentiment after a rocky start to the year. The International Monetary Fund in January cut its forecast for the world economy, predicting it will grow at the weakest pace in three years in 2019.
Risks were evident in fourth-quarter data showing the US economy was steadier than thought, growing by 2.9% annualised, though a buildup of inventories means the outlook is far from certain, according to Bloomberg Economics.
“The economy appears to have dodged a bullet at year-end -but the coast is not clear,” Bloomberg US economists led by Carl Riccadonna wrote in a note.