Fitch Ratings predicts a “mild recession” in the US in the second half of 2024. Although the global growth forecast for 2023 has been revised upwards, China’s real estate market and monetary tightening are influencing the global economic outlook.
According to the Fitch Ratings report, a “mild recession” in the USA in the second half of 2024. Although the global economy will grow faster than expected in 2023, Fitch has worsened its estimates for 2024 due to the decline in China’s real estate market and monetary policy tightening in the US and Europe.
The agency has revised its global growth forecast for 2023 upwards by a tenth to 2.5%. This reflects the resilience of the US, Japan and emerging markets except China. In the United States in particular, growth rose by eight tenths to 2%. However, there was a cut of eight tenths to 4.8% in China and a cut of two tenths to 0.6% in the Eurozone.
The gap between growth in emerging markets (excluding China) and developed economies is expected to widen this year as the monetary tightening cycle in emerging markets advances.
China’s real estate market has suffered a sharp decline, which “casts a shadow over global growth prospects.” The expected stabilization of the market has not occurred and home sales are forecast to decline by 20%. The real estate market accounts for a third of investment and 12% of China’s GDP, and therefore has a strong impact on the economy as a whole. So far, policy easing has been unsatisfactory and export demand is declining.
On the other hand, consumption in the United States recorded rapid growth this year despite the Federal Reserve’s restrictive monetary policy. This is due to savings accumulated during the pandemic and solid growth in household income. However, there has been a slowdown in labor demand in recent months and wage inflation is expected to decline as the labor market cools. Furthermore, credit conditions are becoming increasingly strict and credit dynamics have turned negative. The decline in earnings growth also suggests that the outlook for business investment is weakening. Fitch therefore expects a mild recession in the USA, which is expected to occur in the second half of 2024.
As for the eurozone, the recovery from the energy crisis has stalled and is now facing new challenges arising from the slowdown in global trade and China. Fitch forecasts a decline in the German economy of 0.4%. The tightening of monetary policy by the European Central Bank is weighing on credit growth in the region.
In summary, Fitch Ratings predicts a mild recession in the US in the second half of 2024. Although faster global growth is expected in 2023, the decline in the real estate market in China and monetary tightening in the US and Europe weigh on the outlook. World economy. Home sales are expected to decline in China and consumption to slow in the US. In addition, the German economy will shrink and the Eurozone faces external challenges. These estimates highlight the importance of closely monitoring global economic developments and taking appropriate measures to mitigate the possible effects of the recession.