The outlook is deteriorating in many countries, says Christopher Dembik, director of Macro Analysis, Saxo Bank.

All the major economic regions (world, developed markets and emerging markets) have a Markit PMI close or below 50 and not a single G7 economic has a PMI above 51. There are currently nine major economies in recession or on the verge of it: Argentina, Brazil, Germany, Italy, Mexico, Russia, Singapore, South Korea and the United Kingdom. For some of them, it is due to bad policies but, for others, it is directly linked to the recent evolution of global trade. Many analysts have been too quick to blame trade war for the negative macroeconomic impact. We are not trying to downplay this factor but, in our view, China’s slowdown and China importing less from the rest of the world are more important drivers of lower global trade and recession risk. If we look at countries that are likely to face a technical recession this year – Germany, South Korea and Singapore – they all high a very high exposure to China.

What is different now from a few months ago is that the negative impact of China’s slowdown is not contained to the manufacturing sector anymore. In many countries, especially Germany, there is a contagion of weakness from manufacturing to services.