The COVID pandemic and the subsequent recovery continue to distort the economic data, forcing economists who rely on traditional recession signals to continually revise their assumptions. As a result, the most anticipated global recession in history has become the most delayed recession in history.
To be sure, there are reasons for caution regarding the global economic outlook.
Europe looks likely to endure stagnant growth in early 2024 before recovering in the second half. In Asia, China's economic outlook remains gloomy, with few signs of improvement in the country's property market. Commercial real estate sectors remain fragile in several other countries as well.
Meanwhile, the U.S., Japan, and Europe are at different stages in the balance between growth and inflation, meaning the Fed, the European Central Bank, and the Bank of Japan (BoJ) are likely to pursue increasingly asynchronous monetary policies in 2024, adding to the potential for increased market volatility.
Geopolitical uncertainty also could bring further volatility, particularly if conflicts in the Middle East and Ukraine cause a resurgence in energy prices. Recent election victories for far‑right populist candidates in Argentina and the Netherlands raise the question of whether further wins for populist parties could occur elsewhere, especially in the U.S., where the November 2024 election will be the most consequential currently known political event of the year.
As of late November 2023, most global economies were showing surprising resilience to higher rates (Figure 2), and the U.S. economy was performing better than expected. The unprecedented levels of cash generated by pandemic support and other fiscal stimulus measures have been a key support for U.S. household and corporate balance sheets. Excess consumer savings should continue to provide support for U.S. economic growth going forward (Figure 3).
Major global economies have shown surprising resilience
(Fig. 2) Real GDP growth at 2010 prices
As of September 30, 2023.
Sources: U.S. Bureau of Economic Analysis, Statistical Office of the European Communities, Cabinet Office of Japan/Haver Analytics. T. Rowe Price calculations using data from FactSet Research Systems Inc. All rights reserved.
U.S. consumers are still flush with cash
(Fig. 3) Checkable deposits and currency holdings of U.S. households
As of June 30, 2023. Source: U.S. Federal Reserve Board.
Consumer spending has been the most resilient driver of growth, due to the strength of the US labour market. At the end of September 2023, there were 9.6 million open jobs available for the 6.4 million unemployed workers in the U.S. labour force
This post was funded by T. Rowe Price
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