Outlook for GDP growth, inflation, interest rates and exchange rates
The latest economic indicators updated on February 13 2023 and the coming calendar
Despite the still hawkish messages from the Fed and the ECB, markets are already pricing in rate cuts later this year. What explains these seemingly premature rate cute expectations? They could reflect differences in views on the economic outlook, but it is unlikely these would be so big to justify current market pricing. Another explanation is that investors are rationally managing their risk exposure. Investors know that an unexpected dovish twist in central bank guidance would cause a rally in bond and equity markets. They also know that central banks have no incentive to already soften their guidance but that they have the option to surprise, like they have done in the past. The closer we get to the terminal rate, the bigger the likelihood that central banks would change their message
In the US, financial conditions have eased in recent months and weighed on the effectiveness of the Fed’s policy tightening. Jerome Powell recently gave the impression of not being too concerned, so markets rallied, and financial conditions eased further despite the hawkish message from the FOMC. In the Eurozone, another rate hike by the ECB and the commitment to raise rates again in March caused a huge drop in bond yields because markets expect we’re getting closer to the terminal rate. It reflects a concern of not being invested in the right asset class when the guidance of central banks will change: based on past experience, one would expect that bond and equity markets would rally when central banks signal that the tightening cycle is (almost) over
The latest economic indicators updated on February 6 2023 and the coming calendar
Some discrepancies have become apparent in the most recent surveys. Uncertainty about US economic policy, based on media coverage, has continued on an upward trend since mid-April 2021, on the back of the tightening of monetary policy by the Federal Reserve. The European Commission's economic uncertainty index fell slightly, due to less uncertainty in the various sectors of activity, with the exception of households.
The worldwide fall in Covid-19 cases has continued for the fifth consecutive week. 1.8 million new cases were reported between 20 and 26 January, down 27% from the previous week. The weekly GDP proxy indicator has recovered significantly in Germany, France, Belgium and Italy, while it remains relatively stable in Spain. In the United States, the United Kingdom and Japan, an increase over the latest data points can be noted
The latest economic indicators updated on January 30 2023 and the coming calendar
Which issues will rule global economy in 2023? After a year of major shocks with the return of inflation and monetary tightening, the time has come to turn to 2023, which should be a two-stage transition year: the first half being under the sign of disinflation and the second half allowing us to anticipate the major trends of 2024 . A real dynamism throughout the year, which will therefore influence the decisions of households, businesses and also financial markets.
The OECD team presents its focus on 2023.The year is starting off with contrasting signs in the eurozone, between hope of disinflation and fear of recession.
The latest economic indicators updated on January 23, 2023 and the coming calendar
The second half of 2022 was marked by a significant and generalised fall in global transportation costs, accompanied by a freeing up of supply chains. Global maritime freight fell back to levels almost five times lower than at the peak in autumn 2021. Only transportation costs for liquefied natural gas (LNG) increased significantly, due to Russian gas shortages, although prices have also fallen back since December.
Between 4 and 10 January, 3.4 million new cases of Covid-19 were recorded worldwide, representing a fall of -3% compared to the previous week. This is the third consecutive week of falling infections following seven weeks of almost continuous increases. The number of new cases continues to fall sharply in South America (-24%) and, to a lesser extent, in Europe (-12%).
The latest economic indicators updated on January 16, 2023 and the coming calendar
Europe is still well-placed in the race to adopt more environmentally-friendly lifestyles and to switch over to electric cars, despite being disadvantaged by its higher energy costs.
The global manufacturing PMI edged down in December on the back of a new, significant decline in the US and for the second month in a row an increase in the euro area where the improvement is broadbased.
The latest economic indicators updated on January 9 2023 and the coming calendar
Economic developments in 2023 will to a large degree be the result of the inflation shock of 2022 and the policy reaction of central banks that followed. Three developments look highly likely: disinflation -in terms of headline inflation- should gather momentum, central bank policy rates should reach their cyclical peak and activity should suffer from the rise in interest rates that started last year, implying that the euro area and the US should spend part of the year in recession. The list of uncertainties is long -the evolution of energy prices and the extent and pace of disinflation are key ones- but there are also several factors of resilience, implying that, all in all, the recession should be shallow.
From Adam Smith to the present day, nations' wealth has been built on fossil fuels. Coal, oil and gas have become a vital part of our lifestyles. In 2022, they still account for 83% of the world’s primary mix, that is to say what essentially feeds economic activity.
2022 was a year of profound transformation, of shifting geopolitical and economic paradigms. Looking ahead, 2023 should see a change of direction in key economic variables. Headline inflation should decline significantly, central bank rates should reach their cyclical peak and the US and the euro area should spend part of the year in recession. 2023 can be considered as a year of transition, paving the way for more disinflation, gradual rate cuts and a soft recovery in 2024.
