Economics: Q1 forecast update

The global economy has staved off the threat of recession.

An abrupt end to China’s zero-Covid policy and mild weather in Europe have provided more impetus to global growth than we had previously expected. But some of this momentum is harder to understand, particularly the US’s resilience to higher rates.

The full impact of tighter monetary policy is still to be seen.

We can clearly see the impact of tighter monetary policy using our proprietory toolkit and macro framework. Housing markets have weakened, and pressures are building on corporate cash flows – typical early signs of a downturn.

We continue to expect a hard landing in the latter part of this year.

Resilient data are likely to encourage central banks to tighten more than we previously expected. So, we continue to expect recessions in Europe and the US, though we’ve pushed back the timing of those downturns by about six months.