Summary

  • The expectation that the long-awaited slowdown in global economic momentum would finally materialize in the first half of this year, once again, disappointed.
  • Instead, 2024 so far, has largely just a been repeat of the scenario that has played out persistently over the last four years in which actual growth continues to chug along at a decent pace unabated.
  • If anything, the biggest change concerning growth, so far this year relative to the preceding period, is the evidence of a broadening out beyond the US economy. Regions such as Europe, Japan and Emerging Markets (EM) (including China) that had stagnated in the second half of 2023 stabilized early this year and more recently have shown nascent signs of improvement.
  • In a notable contrast to the last few years, however, it appears that forecasters are no longer just trading near-term strength for weakness later on and kicking out recession calls down the road.
  • An imminent recession is no longer being treated as a high-probability event, with the previously assumed downward inflection for growth replaced by a fairly flat and stable trajectory across the forecast horizon.
  • Even with growth momentum holding up better-than-anticipated, the progress with respect to attaining price stability has led effectively all major central banks to move to the sidelines and signal their intentions to move toward a less restrictive policy stance — a handful of central banks in EM and, more recently, Developed Markets (DM) have begun their gradual easing cycles, with more expected to join the fray before the year is out.
  • While risks remain, the baseline outlook of broadening positive, if unspectacular growth, moderating inflation, and declining interest rates is clearly positive and highly constructive for financial markets.
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