Executives raise global growth alarm on risks from China to UK

The IMF cut its global growth forecasts and 30% of buz leaders expect growth to weaken, about 6 times more than a year ago

By BLOOMBERG

LONDON • Corporate executives are increasingly nervous about the global economic outlook as they see threats multiplying from China to trade to Brexit.

While few see recession looming, louder warnings from semiconductors to logistics signal that waning confidence among businesses and consumers is sapping activity.

The more downbeat mood was underscored by US power-tool maker Stanley Black & Decker Inc, which plunged after saying profit will miss estimates and warning about a global slowdown.

Concerns are rising as investors, bankers and former policymakers at the World Economic Forum in Davos, Switzerland, said the expansion is weakening. Under a deluge of disappointing numbers, European Central Bank president Mario Draghi said risks to the euro-area outlook have moved to the downside, a key acknowledgment of the changed backdrop.

It’s a cause for concern, particularly given the slowdown in the world’s second-biggest economy. China said last Monday that GDP grew 6.6% last year, the slowest pace since 1990, creating a lack of demand that’s cascading down supply chains in the technology and automotive industries. Economists expect further deceleration through 2020.

The mood darkened last Monday as the International Monetary Fund (IMF) cut its global growth forecasts and a survey found 30% of business leaders expect growth to weaken, about six times more than a year ago.

Much of the uncertainty is pinned on the ongoing trade tensions between the US and China as both sides negotiate for a deal ahead of a March 1 deadline, after which US President Donald Trump has threatened an escalation of tariffs on Chinese goods.

Trinseo SA, a US producer of synthetic rubber for tyres, plunged after warning that slowing auto demand in China had reduced fourth-quarter (4Q) earnings, while Nidec Corp, the Japanese maker of micro-motors used in hard drives and other electronic devices, said 3Q profit fell and cited the slowing Chinese economy for weighing on some segments.

Apple Inc’s main chipmaker Taiwan Semiconductor Manufacturing Co Ltd forecast the worst revenue growth in at least a decade. In Europe, Apple chip supplier STMicro electronics NV last week forecast a drop in sales in the first part of the year, though expected a return to growth further out. Taiwan’s Foxconn Technology Group, the biggest iPhone assembler, said it may slow the pace of hiring at its US$10 billion (RM41.3 billion) manufacturing facility in Wisconsin.

But China and trade aren’t the only concerns. Germany’s huge manufacturing sector is faltering, and uncertainty about Brexit is continuing to weigh on UK firms. Airbus SE is the latest company to warn of the damage a no-deal split from the European Union could do.

“Where we see more worries is in Europe, where the geopolitical situation has some impact on the business,” Alain Dehaze, CEO of Swiss recruitment firm Adecco Group AG, said in a Bloomberg Television interview from Davos. “With uncertainty, people are stopping to hire and invest, and it has repercussions.”

In the US, the longest government shutdown in the country’s history could temporarily curtail growth in the world’s largest economy, though Trump said last Friday that a deal had been reached to end the impasse for at least three weeks. Meanwhile, consumer sentiment tumbled this month to the lowest since October 2016, a University of Michigan report showed.

The warnings come as data showed Japan’s exports fell in December, with shipments to China down 7%. South Korea’s exports — a bellwether for tech demand — fell 15% from a year earlier in the first 20 days of January, the most since September 2016.

While infrastructure hasn’t been affected as much as other industries, ripple effects from the spat are affecting shortterm decisions, said an expert. — Bloomberg