Economic and Financial Review - June 2019

June 2019 Economic and Financial Review EXECUTIVE SUMMARY

E X E C U T I V E S U M M A R Y

Developments in the global economy during the review period were characterised by persistent weaknesses in global trade and lower manufacturing activity, combined with higher tariffs from lingering trade tensions, all contributed to a deceleration in global growth in the first half of 2019. The International Monetary Fund (IMF) in its World Economic Outlook report released in October 2019, noted that the volume of global trade in the first half of 2019 grew by a mere 1.0 per cent above its value in the prior year, and marked the slowest pace of growth for any six-month period since 2012. The review period was also marked by lingering trade tensions between the United States of America (USA) and China, as both parties retaliated with additional tariff measures. These developments were exacerbated by uncertainties related to the United Kingdom’s imminent withdrawal from the European Union. Amid these concerns and the resulting policy uncertainty, a number of major central banks responded by switching to more accommodative monetary policy to support short-term growth. The deceleration in global growth was influenced by weaker growth in the US economy, which fell to 2.0 per cent in the second quarter of 2019, a marked slowdown from the 3.1 per cent growth recorded in the first quarter. The expansion in the second quarter was due mainly to robust household consumption, which was driven by strong labour market conditions. Labour market conditions remained buoyant, as there were strong growth in new jobs created and an increase in wages. The buoyant labour market in the USA, the largest market for stay-over arrivals in the ECCU, helped to boost demand for tourism services in the ECCU. Average headline inflation in the USA increased marginally to 1.8 per cent in the second quarter from 1.7 per cent in the previous quarter from higher gas and electricity costs.

Activity in the United Kingdom, the region’s third largest source market for tourist arrivals, contracted in the second quarter as uncertainty over the country’s planned withdrawal from the European Union on 31 October took its toll. The economy contracted by 0.2 per cent on a

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Eastern Caribbean Central Bank