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World Economic Prospects

Each month Oxford Economics’ team of 300 economists updates our baseline forecast for 200 countries using our Global Economic Model, the only fully integrated economic forecasting framework of its kind. Below is a summary of our analysis on the latest economic developments, and headline forecasts. To access the full report (and much more), request a free trial today.

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Fears of a US recession are wide of the mark

• We believe the growing concerns that the US might be slipping towards a recession are unfounded and think recent news remain consistent with a more orderly and benign growth slowdown. Against this backdrop, we expect the world economy will grow by 2.7% both this year and next, very similar to our growth forecasts a month ago.
• The recent rise in the US unemployment rate has breached the Sahm rule – a closely watched recession indicator – compounding the equity market selloff, particularly in the tech sector. But higher unemployment has been driven by increases in the work force, rather than firms laying off workers, suggesting that the rise in unemployment is less worrying than the headline numbers suggest. As a result, we believe the indicator may be providing a false recession flag.
• More generally, we would caution against fixating on one indicator to predict a recession. For example, the inverted yield curve has been pointing to a recession for the past two years, and yet the US economy has grown robustly over that period. We prefer to take a more nuanced view using a wide range of indicators and analysing the reasons why the data may be moving.
• The US presidential election opinion polls initially favoured Republican nominee Donald Trump after the assassination attempt, but have since swung towards the Democratic nominee and Vice President Kamala Harris after President Biden decided not to seek re-election. However, a key point to note is that the Harris presidency and limited Trump presidency scenarios – the two most likely outcomes – would result in GDP growth next year that is similar to our existing baseline.
• As a result of a stronger-than-anticipated Q2 outturn, we’ve nudged up our US GDP growth forecasts by 0.3ppts to 2.6% for 2024 and by 0.1ppt to 1.9% in 2025. This has been offset at a global level by a cut to our eurozone forecast amid signs that the recovery is faltering as the boost to real income growth from falling inflation fades. We expect eurozone GDP growth to rise from 0.8% in 2024 to 1.4% next year, 0.3ppts lower than a month ago. Despite the concerns about the US, we still expect its growth rate will outpace the eurozone over the coming quarters.

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