The latest data are consistent with our view that the world economy is in a soft patch. There are signs that global manufacturing is headed for recession and trade will soften. Consumers in DMs outside the US seem reluctant to spend, and banks in major DMs are not in a lending mood. Meanwhile, stepping back from the strong September release of US non-farm payrolls, the big picture is that labour markets are loosening across DMs. But with private sector finances healthy and financial conditions loosening, soft landings are still the base case. And while domestic demand in China has lost momentum this year, reports of a fiscal support package hint at better growth prospects in the near term. Below-trend global GDP growth and falling inflation will give most central banks the green light to cut policy rates in the coming months. However, the pace of monetary easing will slow or even halt in several EMs where inflation is sticky.
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