Overview
Global economic activity remained resilient through the third quarter even after considerable monetary tightening by global central banks over the past 18 months:
- Despite speculation earlier this year that a US recession was imminent, strong labor demand provided a buffer to household incomes and supported private consumption, boosting the economy. The most likely economic scenario is one of modest US growth in the back half of 2023 and into 2024, with a lower risk of recession in the near term.
- The risks of a European recession are significant. Europe's post-COVID recovery has already faded, with Q2 GDP growth just barely positive in the Eurozone, UK, and Switzerland. Available hard data for Q3 is mixed, while soft data is dreadful.
- Weak growth is likely to continue in China, barring significant measures by the government to jumpstart the economy. Consumption spending and industrial activity remain anemic, while the real estate sector continues to struggle. In contrast to Europe and China, Japan is a relative bright spot, with economic growth underpinned by solid consumption and business spending and a more supportive central bank.