Fitch Ratings forecasts a “mild recession” in the US in the second half of 2024 due to the decline in China’s real estate market and monetary policy tightening in the US and Europe. The agency also updated its global growth estimates for 2023 and 2024, highlighting surprising growth in the United States, Japan and emerging markets excluding China. However, a decline in the German economy and a slowdown in growth in the euro area are expected. Find out all the details in this article about investment strategies.
Fitch Ratings predicts a “mild recession” for the US in the second half of 2024
Fitch Ratings has updated its global economic outlook report, highlighting the possibility of a “mild recession” in the United States in the second half of 2024. This forecast is based on the impact of the sharp decline in the real estate market in China and the tightening of monetary policy in the United States and Europe.
According to Fitch Ratings, the global economy is expected to grow “somewhat faster” than expected in 2023. The agency has revised its global growth forecast for this year up by a tenth to 2.5%. This increase reflects the surprising resilience of the US, Japan and emerging markets excluding China.
Specifically, Fitch has increased the growth forecast for the USA by eight tenths to 2% and for Japan by seven tenths to 2%. In addition, growth in emerging markets excluding China rose by five tenths to 3.4%. These improvements offset cuts in growth forecasts for China and the Eurozone.
Notice in the chart that 2024 corporate earnings expectations have deteriorated over time, although it appears that the US is marking a floor on these expectations and is above Europe or China.
On the other hand, Fitch Ratings has lowered its global growth estimates for 2024. Global economic growth is expected to slow, with widespread downward revisions. The growth forecast for the USA was cut by two tenths to 0.3%. The Eurozone has also seen a decline of three tenths, with growth forecast at 1.1%. For China and the emerging markets excluding China, their growth forecasts have fallen by two tenths and remain at 4.6% and 3%, respectively.
The decline in China’s real estate market and tightening monetary conditions in the US and Europe are presented as the biggest challenges to global growth in 2024. Fitch Ratings emphasizes that the Chinese real estate market has not yet stabilized. which affects export demand. As for the United States, while consumption growth has been solid, demand for labor is expected to slow and business investment prospects are expected to weaken due to tightening credit conditions.
In the euro area, the recovery has stalled due to the energy crisis and faces new challenges arising from the slowdown in global trade and China. In addition, the European Central Bank’s monetary policy tightening is impacting credit growth in the region.
Despite the downward revisions for 2024, Fitch Ratings emphasizes that faster-than-expected growth is expected in 2023, indicating some economic resilience in the coming years. However, it is important to pay attention to current challenges that could impact the global economic outlook.