July 19, 2023

The Forward View – Global: July 2023

China’s weak Q2 growth presages weaker global growth


  • China’s economy grew by 0.8% on a quarter-on-quarter basis in Q2, down from 2.2% in Q1, as its post-zero-COVID rebound faded, with consumer demand still tepid, ongoing weakness in the residential property sector and easing goods demand in major trading partners.
  • The China GDP data is the first released for the quarter, but global growth appears to have slowed more broadly in Q2, including India and Latin America, although major advanced economy growth was likely similar to that seen in Q1.
  • Global inflation has continued to gradually ease – with our measure of consumer prices increasing by 5.8% yoy in May 2023, the slowest rate of increase since December 2021.
  • Even so, further policy rate increases are likely by the major advanced economy central banks, although positive June CPI data has increased hopes that the US Federal Reserve is close to ending the current tightening cycle. In contrast, the outlook is more mixed for EM central banks, with some either having cut rates or soon expected to do so.
  • Continued monetary tightening – and the flow through of past increases – will weigh on global growth. As a result, we expect the downshift in growth in Q2 to be sustained. The Global Composite PMI fell in June; the decline was broad based and included the first fall in the services PMI since late 2022.
  • As a result, we continue to expect weak global growth in both 2023 and 2024. Our forecast for 2023 is unchanged at 2.8%, while 2.7% is expected for 2024 (previously 2.6%). That said, risks around the outlook have become more balanced, with economic growth showing continued resilience, lower inflation signalling less upside risk to policy rates, and the stress in financial markets (following banking issues earlier in the year) having receded. However, uncertainty remains about how far monetary tightening goes (and its impact), and there are still various geopolitical risks – such as from the continuing Russia/Ukraine conflict.

For further details, please see The Forward View Global (July 2023)

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