CRU: From V to U: U.S. Recession Would Prolong Industrial Slowdown

By CRU Economic Analyst Ippolito Tarabini and Chief Economist Jumana Saleheen

World industrial production growth halved in 2019H1 to 1.5 percent from 3 percent in 2018, suffering because of a slowdown in China, the widespread downturn in the automotive sector, and the unpredictable trade negotiations between the U.S. and the rest of the world, particularly China. In response, metals demand in major economies has contracted. CRU’s base case view is that IP will modestly recover in 2020 (rising to 2 percent y/y), but the risks to our IP forecast lie to the downside. CRU’s models suggest that the probability of a recession in the U.S. and Germany is at ~40 percent, the highest it has been since the Global Financial Crisis. Recession in the U.S. would prolong the global industrial slowdown by another 12-18 months making the recovery “u” rather than v-shaped.