US leads, others lag, in uneven global economy

The global economy will grow by a solid yet unspectacular 3% in 2026-27, but the sources of growth are becoming increasingly unbalanced. The US will be the best performing major advanced economy, as what appears to be an AI-related boost to productivity and investment offsets the supply-side effects of immigration curbs. In contrast, growth in Europe will remain sluggish, despite a fiscal relaxation in Germany, and China’s economy will continue to struggle. EM growth is likely to be soft by recent standards, although India and the Gulf economies should be pockets of relative strength. Most central banks will loosen policy over the next year, but the Fed is unlikely to cut interest rates by as much as investors now anticipate, while the ECB and Bank of England are likely to cut by more than is currently priced into markets.