Overview

• Global inflation eased slightly in January. Advanced economy consumer price inflation fell below 3% yoy in January, its lowest level since May 2021. However, some recent high monthly inflation reads has shifted out market expectations of when central bank rate cuts will start in, and the extent of easing likely to occur, over 2024. The Bank of Japan is on a different path to the other major central banks and this week ended its negative interest rate policy although the degree of actual tightening implemented was small.
• Outside of the US, the major advanced economies have been tracking sideways or seeing only weak growth. Despite this, employment growth remains positive and unemployment rates low, but falls in job vacancies do point to an easing in labour supply/demand imbalances. We expect only modest major AE growth over 2024.
• Emerging market economies are relatively trade dependent so modest advanced economy growth will constrain their growth. That said, India Q4 GDP growth and Russia GDP for 2023 were both well above expectations, although we have concerns around the accuracy of these results.
• Nevertheless, as per our standard practice, we take the India and Russia results at face value, which has led us to revise up our global growth forecasts. We now expect the global economy to expand by 2.9% in 2024 (previously 2.8%) before edging up to 3.0% in 2025. With 2023 global growth looking like it has come in a bit below its long-term average (of 3.4% between 1980 and 2022), these forecasts, point to a three year stretch of sub-par growth, which would be the first time this has occurred since the early-to-mid 1990s.
• There remain a range of uncertainties. If inflation does not fall as expected, this could delay policy rate cuts. Geopolitical tensions remain, including the potential for existing conflicts in Europe and the Middle East to widen. US-China tensions remain an issue against the backdrop of the US elections later this year.

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