2018 in economics: from market turmoil, to trade war and Brexit
Market turmoil, a trade war, a softening global economy, a sputtering Germany, a budget-busting Italian government and Brexit: the FT's economics commentator Martin Sandbu reviews a tough year in economics.
Filmed by Petros Gioumpasis. Produced, edited and directed by Daniel Garrahan
Market turmoil, a softening global economy, a sputtering Germany, and a budget busting Italian government, a trade war and, not least, the continuing fallout from the UK's Brexit vote. This is 2018, the year that was in economics. It all started so well.
Growth was strengthening everywhere except here in Brexit Britain. But then in January, the World Bank cautioned that things might be too good to last. This sounded Eeyorish.
After a record of being too optimistic, perhaps the guardians of the world economy were now guilty of too much pessimism. Well, sometimes Eeyore is right. February opened with a violent few days in global markets. Stocks tumbled, volatility surged, Bitcoin tumbled, too.
In March, an election took place in Italy that put an end to three months of uncertainty that had spooked investors, or did it? The winners were the rightwing populists of the League, and the left anti-establishment Five Star Movement. Their views of the economy were not exactly the fiscal responsibility markets tend to like.
This was like coming out of political limbo only to be dropped into political purgatory. Apart from that, it was a quiet month of March. Move on people. Nothing to see here, just the leader of the free world slapping a 25% tariff on steel and aluminium imports.
The president has said we're not afraid of getting into a trade war.
Reassuring words there.
Having said that, that's not our goal.
Well, a trade war might not have been America's goal. But...
The early summer echoed the emerging markets crises from the 1980s and the 1990s, and the early 2000s. Argentina needed to ask the IMF for help, again.
Meanwhile, Trump's belligerent trade rhetoric was intensifying. In June, he threatened higher tariffs on European cars. But the cost of protectionism was starting to bite at home. American factories were facing steel prices in the US that were outpacing those in other countries.
The rising trade tensions that we see before us, they risk a major economic impact.
But the tax cut passed at the end of 2017 continued to give the US economy fair winds. In July, Donald Trump hailed the fastest US growth rate since 2014, boasting that the numbers were very, very sustainable and that the US was the economic envy of the entire world. But the US president's assessment of his own record isn't the most reliable.
Listen instead to my esteemed colleague Martin Wolf who called Trump, and I quote, "a dangerous ignoramus." And he accused the president of causing global chaos with his tariff policies. Another month, another emerging market crisis. This time it was Turkey's turn. After a long credit fueled boom, foreign lenders pulled the plug. And the Turkish lira plunged by 12% in a single day.
It's probably going to get to the point where the IMF is the only way that we're going to see stability in the Turkish economy.
The populist coalition that had won the Italian election put together a budget to fund its expensive election promises. But the September budget badly defied EU budget rules by expanding the deficit.
Within weeks, the European Commission for the first time used its power to reject a national budget. This conflict took its toll on the European economy. The third quarter growth numbers slowing sharply to its slowest rate in four years. But that wasn't the only problem.
New emissions tests hitting German car production was weighing on industrial production in Europe's heartland. And further afield, China revealed its slowest growth rate in nearly a decade. All this bad news prompted a slump in global equity prices in October. And stock prices continued to sag throughout the rest of the year.
German car troubles and trade tensions have caused the eurozone's economic powerhouse to shrink for the first time in three years. But still, maybe the European economy could take this in its stride as long as there was nothing else to destabilise it. Oh, wait, every time Theresa May makes a decision, someone seems to resign.
In November, she finally agreed a Brexit deal with the EU, prompting several cabinet ministers to depart. And it didn't stop there. With the realities of Brexit finally dawning on MPs just months before the leaving date, all factions of the House of Commons ganged up to attack the prime minister.
As all my right honourable friend says and what my right honourable friend does no longer match, should I not write to my right honourable friend the member for Altrincham and sail west?
Fighting talk from the right honourable member for Northeast Somerset. It's a reference to the letters expressing no confidence in the prime minister, which after a few false starts in December, reached the required number of 48 to trigger a vote on her leadership of the Conservative party.
Sterling had started behaving like an emerging market currency, at least in terms of its volatility. In some rare good news for the prime minister, Theresa May managed to beat back a leadership challenge from her own party. But the UK's future remains highly uncertain.
The political and economic risks are all still in place - in every region of the globe. The caution at the start of the year may have proved wise. Global growth performed adequately, but nothing more. And the momentum from the start of the year has clearly been lost. And as 2018 turns into 2019, it is much easier to see things getting worse than to see them get better.