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Consensus global growth forecasts have improved slightly since last month as economies continue to look somewhat resilient relative to previous expectations. Bloomberg consensus estimates for world GDP bumped up to 2.6% for 2023 (from 2.4% last month and 2.1% to start the year). Growth estimates for US, Europe and China have all been revised upwards over the past couple of months.
Inflation continued to be a headwind globally and the European Central Bank (ECB), Bank of England (BoE) and the Federal Reserve (Fed) increased their respective policy rates in May.
We continue to expect an economic downturn in the US in 2023. The economy appears to be crawling to recession as opposed to “falling off the cliff" due to a profits recession and/or industries going bust. That said, we are seeing better performance from equities and credit spreads. This could be reflective of a resilient economy. The US GDP report showed strong consumer spending at 3.8%, while disposable personal income was super strong at a 7.8% quarter-over-quarter annual rate.[i] The potential for a wage price spiral is likely concerning to the Fed. We believe persistent economic resilience and sticky inflation could prompt it to hike rates to 5.75%.
[i] Bureau of Economic Analysis, 27 April 2023.
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