The macroeconomic forecasts prepared at the beginning of autumn help to take the pulse of the economy after the summer and focus on the dynamics of the following year. On this occasion, the outlook is increasingly uncertain, more than because of the collapse of economic models and theories recently announced by Wolfgang Münchau in these pages, due to the combination of the slowdown in disinflation , a hangover from two major shocks (covid and war in Europe) and divergent cyclical trends in t…
The macroeconomic forecasts prepared at the beginning of autumn help to take the pulse of the economy after the summer and focus on the dynamics of the following year. On this occasion, the outlook is increasingly uncertain, more than because of the collapse of economic models and theories recently announced by Wolfgang Münchau in these pages, due to the combination of the slowdown in disinflation , a hangover from two major shocks (covid and war in Europe) and divergent cyclical trends between the three major global economies. All this in a context of structural changes whose impact is still difficult to evaluate, but of undoubted importance: geopolitical turmoil, rapid knowledge of climate change, demographic contraction and stability of labors market, etc.
Cyclically, during the summer a clear divergence between the three major economic areas of the world is revealed. In the United States, consumption and employment appear to be better than expected with the tightening of fiscal policy, and a recession previously expected in early 2024 is likely to be avoided. In China, economic growth after the end of the pandemic has been more anemic than expected, and although the latest indicators point to stabilization and the margin for monetary and fiscal support is wide, forecasts have been revised. or down. In Europe, the slowdown is not as strong as in China, but the manufacturing sector continues to be affected by the weakness of Asian trade and rising costs, and although services have resisted better – especially those linked to tourism – they also point to a rapid deceleration.
Regarding economic policies, the main focus of attention at the end of the summer is the continuation of inflation a little higher than desired, due to a rebound in energy prices, and a very slow deceleration in underlying inflation, still at very high levels. The Federal Reserve and the European Central Bank may have reached their maximum interest rates, but they are now focused—successfully, it seems—on convincing agents and markets that those levels will be maintained for a long time. It seems that they are not willing to relax their inflation expectations now that the disinflationary process is underway.
In this way, a soft landing for the global economy can be expected in the coming quarters, with the same global growth in 2023 and 2024 (2.9% and 3%, respectively). A certain normalization of growth and inflation and, later, of interest rates is necessary to face the many structural challenges presented to us in the future.
