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There is growing evidence that weakening demand in major economies is taking a toll on world trade. While trade volumes rose in August, early reporting Asian economies revealed a decline in imports in September, exports orders have fallen sharply across …
26th October 2022
Table of Key Forecasts Global Overview – Persistently high inflation and more aggressive monetary policy tightening now seem set to cause a global recession. While we had previously anticipated contractions in several economies, the gloom has spread …
25th October 2022
October’s flash PMIs provided further evidence that several of the major advanced economies are heading into recessions. The surveys suggest that activity was already contracting at the start of Q4. And apart from during the initial COVID outbreaks, new …
24th October 2022
The latest data suggest that the labour market strength, which has been a key feature of advanced economies this year, might be coming to an end. Admittedly, unemployment rates have generally been stable at very low levels. However, falling job vacancy …
14th October 2022
Strictly speaking, recent measures by the Bank of England do not qualify as so-called “fiscal dominance”. But this could be the thin end of the wedge, and not just for the UK. While we are a long way off central banks in developed economies directly …
13th October 2022
The dollar’s appreciation is bad news for the global economy, as it will weigh further on demand for traded goods and add to global inflationary pressures. It is another reason why we expect the global economy to fall into recession next year, and risks …
12th October 2022
Central banks have the tools to deal with liquidity crises arising from rising interest rates and falling asset prices. Instead, the bigger threat is that higher interest rates produce large and simultaneous falls in asset prices that threaten the …
11th October 2022
China’s economy has essentially stalled. This does not mean that aggregate growth in the rest of the world will automatically slow, but there will be winners and losers at a country level. Recent economic news from China has been dismal. (See here .) We …
One result of the rise in near-term interest rate expectations is a deterioration in the outlook for global housing markets. We already expected house price falls in a handful of countries. Now those falls look set to be bigger, while corrections are …
7th October 2022
With pr ic e pressures still strong, the looming global recession is unlikely to derail central banks’ tightening plans in the months ahead. While the RBA quoted the deteriorating global outlook when it recently decided to slow the pace of rate hikes in …
6th October 2022
Inflation persistence has strengthened the drive for higher rates… … while weak exchange rates and fiscal policy concerns add to challenges for some. Peaks will be higher than we had assumed and the risk of policy mistakes has grown. Recent developments …
4th October 2022
The latest manufacturing PMIs suggest that global industry has already weakened significantly and is set to perform worse in the coming months as high inflation and rising interest rates take their toll. While higher commodity prices caused price …
3rd October 2022
The sharp increases in gas and electricity prices in Europe mean that households there – particularly in Germany and Italy – will see a steep rise in their costs of energy consumption. Accordingly, governments have announced support packages worth …
28th September 2022
While world trade was resilient in the first half of this year, there is growing evidence that it has since weakened, and we suspect that it will contract outright in 2023 as the world economy falls into recession. Weaker demand for traded goods and …
It is now clear that central banks in advanced economies will raise interest rates even further than our above-consensus forecasts had implied, making the current tightening cycle the most aggressive in three decades. While this may be necessary to tame …
27th September 2022
Another month, another batch of PMIs pointing to Q3 GDP having fallen in major advanced economies. Yet despite the deterioration in real activity, as well as some further signs that pipeline price pressures are easing, September’s PMIs will do little to …
23rd September 2022
Table of Key Forecasts Overview – There has been growing evidence that pipeline price pressures have eased, underlining our view that inflation will fall sharply next year. Commodity prices and shipping costs have fallen, product shortages have …
The post-pandemic recovery in travel and tourism still has some way to go in parts of the world that have been slower to lift restrictions, such as in Asia. And China’s reluctance to move away from its zero-COVID approach means tourism for leisure …
15th September 2022
The latest data have revealed that the world’s major economies are all struggling, but for different reasons. In Europe, the energy crisis is largely behind the recent softness in consumer and industrial activity. In the US, higher interest rates are …
14th September 2022
Hopes that policymakers can engineer a soft landing rest heavily on the belief that wage growth can be tamed without a surge in unemployment. This ‘Phillips curve’ relationship has changed recently, with G7 pay growth now higher than it was before 2020 …
6th September 2022
The fall in the global manufacturing PMI in August implies that global industrial activity is contracting, and the further decline in the new orders and export orders sub-components suggests that things will only get worse. The good news is that weak …
1st September 2022
World trade was broadly unchanged at a high level in June, and timelier data suggest that the continued easing of supply constraints in China helped lift exports in Asia in July. But forward-looking indicators suggest that global demand for goods …
26th August 2022
August’s flash PMIs suggest that activity has weakened considerably, and, at face value, suggest that both the US and euro-zone have fallen into recession. What’s more, the forward-looking components of the PMIs point to further falls in output ahead. The …
23rd August 2022
In addition to revealing that higher interest rates had barely affected household and corporate finances, national accounts data for Q1 suggested that, with the exception of households in a handful of medium-sized economies, private sectors are …
19th August 2022
Given that unemployment rates have usually risen significantly in recessions, it is tempting to conclude that history is about to repeat itself, to the frustration of policymakers seeking soft landings in labour markets. But the pandemic has produced …
15th August 2022
There have been growing signs that we are at the turning point in global inflation. Commodity prices and shipping costs are down both in y/y and level terms, while product shortages have alleviated as softer demand and fewer bottlenecks have opened up …
12th August 2022
Taiwan matters far more to the world economy than its 1% share of global GDP would indicate. A further escalation in cross-strait tensions that cut Taiwan’s export off from the rest of the world would lead to renewed shortages in the automotive and …
8th August 2022
Banks are frontloading rate hikes to stem inflation risks and avoid more pain later on. Early signs are ok, with inflation expectations down and demand weakening somewhat. But rates could need to fall back before long, especially where housing risks …
4th August 2022
July’s fall in the global manufacturing PMI supported other evidence that the industrial sector is in or close to recession and the forward-looking indicators point to further weakness to come. At least the weakness of demand has caused backlogs of work …
1st August 2022
We held an online Drop-In event yesterday to discuss our Q3 Global Economic Outlook and the forecasts within it (see an on-demand recording here ). This Update addresses several of the client questions that we did not have time to answer during the event. …
28th July 2022
A sharp rebound in Chinese exports helped lift world trade higher in May, and could boost trade further in the coming months. But outside of China, forward-looking indicators still suggest that weaker global demand will weigh on trade, meaning that …
27th July 2022
The news today that Gazprom will further reduce its natural gas supply to Europe increases the likelihood of recessions in the euro-zone, UK and parts of Emerging Europe. It also supports our view that inflation pressures will be relatively persistent in …
26th July 2022
Another month, another set of downbeat PMIs for advanced economies. The demand indicators weakened markedly in the US and the euro-zone for the second month in a row, crossing over into recessionary territory. The flipside of the softer demand is that …
22nd July 2022
Table of Key Forecasts Global Overview – The outlook for the world economy has darkened again and we have reduced our forecasts for all major economies, leaving them further below the consensus of economists. We now anticipate recessions in the euro-zone …
21st July 2022
We held a Drop-In earlier today to discuss recent developments in Sri Lanka, where the economic and political crisis is going from bad to worse. This Update answers several of the questions that we received. How bad is the economic situation? In a …
14th July 2022
Recent data suggest that global economic activity was even weaker than we initially thought in Q2, with GDP probably contracting in several major economies including the euro-zone, UK and China. The earliest signs for Q3 are not good, with business …
13th July 2022
Even though workers are accepting cuts in their real pay, nominal wage growth is still above “acceptable” rates for central banks in DMs of 3% to 4%. This underlines why interest rates need to head into restrictive territory to weaken economic activity …
5th July 2022
Policymakers will have breathed a small sigh of relief at the latest manufacturing PMI surveys because they contained lots of signals that global goods price inflation will ease later this year. Demand softened, backlogs cleared, delivery times improved, …
1st July 2022
The consumer recovery in advanced economies has been characterised by particularly strong spending on goods and a weaker pick-up in services demand. There are signs that goods spending is now flattening off as households are able to buy more services. But …
30th June 2022
Official data showed that world trade rose slightly in April and limited data for May suggest that it probably rose further as disruptions from lockdowns in China eased. But weaker global final demand for goods, due to a gradual normalisation in spending …
28th June 2022
Table of Key Forecasts Overview – While inflation has broadened out and surprised to the upside in 2022 (see Chart 1), we maintain the view that it will fall sharply in the year ahead. For one thing, we expect commodity prices to fall. Even if we are …
Having held up better than much of the data in recent months, the S&P Global PMIs have finally taken a considerable leg-down in the US and euro-zone. While the PMIs are still consistent with economic expansion rather than recession in Q2, they nonetheless …
23rd June 2022
There is still scope for an improvement in labour supply in the US, UK and euro-zone, which might over time alleviate some of the tightness in their labour markets. But it could yet take a long time to materialise. Unemployment rates are now back at, or …
We have raised our interest rate forecasts as banks double down on hawkish stance Alarming inflation picture points to more big hikes in the near term…. … but weakening activity will warrant a slower pace of tightening before long. It’s been a momentous …
22nd June 2022
Equilibrium interest rates in advanced economies are probably still very low. However, there is still a lot of uncertainty about how far above this equilibrium interest rates will have to go in the near-term to quash inflation. Even if we are right in …
21st June 2022
We held a Drop-In yesterday to discuss recent developments in central banking and related financial market implications. This Update answers several of the questions that we received, some of which we couldn’t fit in during the event and some that we are …
17th June 2022
Global economic activity might have contracted slightly in Q2, which would be the weakest outcome in recent history aside from the height of the pandemic and the Global Financial Crisis. Part of the weakness reflects a likely slump in Russian GDP, but we …
15th June 2022
Surging food prices are a cloud over the global economic outlook. While food inflation should fall sharply next year, it will remain high in the near term, eating further into households’ spending power and weighing on discretionary spending. What’s more, …
14th June 2022
Housing markets are now showing signs of starting to weaken. While the consensus is that house price inflation will merely slow, we expect outright prices to fall in several of the most vulnerable markets. We have highlighted before which housing markets …
13th June 2022
The latest manufacturing PMIs suggest that industrial activity weakened a touch in May. But while the forward-looking components of the surveys imply that weaker demand will weigh on output in the months ahead, there were some further signs that …
1st June 2022
