1. A soft-ish landing is in sight for the West
Once again, the US stands out against other major economies by the pace of its growth. China in particular has disappointed after a strong Q1. Falling tax revenues suggest declining profit margins and a weaker labour market, and the country is struggling with deflation. The euro area had a cyclical bounce in H1, but the recovery there still seems fragile.
India and Japan have been growth success stories. But neither is large enough to be a decisive engine for the world economy.
Fortunately, the US expansion is intact. Yes, the job market has slowed, and households’ excess savings have largely been used up. However, growth in payrolls is still solid and aggregate household incomes are rising. Fears of a new surge in inflation have faded, allowing the Fed to start cutting.
All told, our Research analysts expect global growth of 2.9% next year, down slightly from our previous forecast in June.