US upgrade prompts a small lift to our global GDP forecast
- An upward revision to our assessment of the US outlook has helped to push up our world GDP growth forecasts up by 0.1ppt to 2.6% in 2023 and 2% in 2024. Despite the upgrade, growth prospects for the year ahead remain weak.
- The latest batch of national accounts data for many large economies confirmed that recent economic resilience was maintained in Q3. Our latest estimate is that world GDP expanded by 0.7% in Q3, a little stronger than the growth rates of the preceding two quarters and our forecast from a month ago.
- Nonetheless, the ongoing downtrend in the global composite PMI – which fell to the 50 no-change level in October – suggests that Q3’s strength could be a last hurrah. We continue to see a prolonged period of steady and unspectacular growth over the coming quarters, despite the slight upward revision to our global growth forecast.
- Given the strength of activity in the US, we think the economy will likely avoid a recession around the turn of the year. The upward revision to growth in H2 and early 2024 has raised our projection for US GDP in 2024 by 0.8ppts to a 1% expansion. The absence of a recession has prompted us to push back the timing of the Federal Reserve’s first rate cut to September.
- But we still think that the robust pace of growth that the US economy has enjoyed so far this year is coming to an end. We expect quarter-on-quarter annualised growth to slow from 4.9% in Q3 to around 1% in Q4 and to be weaker still during 2024 as the impacts of tight monetary policy and restrictive fiscal policy bite and dwindling excess savings diminish households’ financial buffers.
- Other advanced economies are set to grow sluggishly as the adverse impact on activity from past policy tightening builds. Chinese authorities are also showing no appetite to act as global spender of last resort. We therefore think the global economy will endure a prolonged soft patch and will see a second consecutive year of sub-par growth in 2024, even by the standards of the 2010s.
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