Overview

• Global inflation remains elevated and, edged higher in May to 5.1% yoy, with recent upward pressure coming from emerging markets. Advanced economy inflation has remained comparatively stable in 2024 and was 2.6% yoy in May, slightly down from 2.7% yoy through Q1.
• Recognising the reduction in inflation from its peak that has already occurred, cooling labour markets and that monetary policy is clearly restrictive, the major AE central banks (outside of the Bank of Japan) have started easing rates or are expected to do so soon. Low inflation readings in the US in May and June, as well as a cooling labour market, are laying the foundation for the Fed to start easing in September.
• The major advanced economies appear to have generally experienced moderate growth in Q2, except the UK which again appears to have grown rapidly. In the US, we are expecting growth in Q2 to be similar to that in Q1; still reasonable but well down from the robust pace of H2 2023.
• There were contrasting election results in the UK and France, with a clear winner in the former but a coalition government will need to be formed in France. The new UK government is promising supply side reforms but in both cases government action will be constrained by needed budget repair.
• Emerging market business surveys weakened considerably in June, but from a high level. China’s economy grew by 4.7% yoy in Q2 – down from 5.3% yoy in Q1, with weak domestic demand an ongoing headwind; while a surge in export volumes has supported growth it is unlikely to be sustainable.
• Our global forecasts are unchanged and we continue to expect soft global growth of only 3.0 to 3.1% between 2024 and 2026. There remain a range of risks around the outlook, including the extent and speed of central bank easing, as well as geo-political tensions (Ukraine/Russia, Middle-East, South China Sea). Trade protectionism continues to ramp up and could take a further turn for the worse if, as is now expected, Donald Trump is elected as President in November.

For further details, please see The Forward View Global (July 2024)