World economic outlook

After strong growth in 2017 and early 2018, globaleconomic activity slowed notably in the second halfof last year, reflecting a confluence of factors affectingmajor economies. China’s growth declined followinga combination of needed regulatory tightening to reinin shadow banking and an increase in trade tensionswith the United States. The euro area economy lostmore momentum than expected as consumer andbusiness confidence weakened and car production inGermany was disrupted by the introduction of newemission standards; investment dropped in Italy assovereign spreads widened; and external demand,especially from emerging Asia, softened. Elsewhere,natural disasters hurt activity in Japan. Trade tensionsincreasingly took a toll on business confidence and, so,financial market sentiment worsened, with financialconditions tightening for vulnerable emerging marketsin the spring of 2018 and then in advanced economieslater in the year, weighing on global demand. Conditionshave eased in 2019 as the US Federal Reservesignaled a more accommodative monetary policystance and markets became more optimistic about aUS–China trade deal, but they remain slightly morerestrictive than in the fall.