The global economy is entering “a perilous phase” of low economic growth and rising financial risks alongside persistent inflationary pressures, according to the IMF. The IMF downgraded its forecast for global economic growth from 2.9% to 2.8% this year, and from 3.1% to 3% next year.
- US CPI eased to 5% but core inflation edged higher
- The eurozone economy expanded by 0.1% in Q1
- Sentiment amongst Japanese manufacturers deteriorated
IMF downgrades its forecasts: the global economy is entering “a perilous phase” of low economic growth and rising financial risks alongside persistent inflationary pressures, according to the International Monetary Fund (IMF) . The IMF downgraded its forecast for global economic growth from 2.9% to 2.8% this year, and from 3.1% to 3% next year.
“US consumers continued to feel the pinch from higher interest rates and above-target inflation”
Question-marks over financial stability: amid continuing concerns over the resilience of the banking system and growing unease over the prospects for US bank First Republic, the Financial Stability Board (FSB) – an international body that monitors the global financial system – warned G20 finance ministers and central bank governors that the outlook for financial stability had “become more challenging in recent weeks”. Urging authorities to remain vigilant, the FSB commented: “This latest episode had its origins within the financial system. So the need for financial authorities to learn lessons, and act upon them, is all the greater”.
Inflation continues to bite: as US consumers continued to feel the pinch from higher interest rates and above-target inflation, consumer spending stagnated during March. The rate of consumer price inflation in the US eased from 6% year on year in February to 5% in March . However, the core inflation rate, which strips out food and energy prices, actually rose slightly, increasing from 5.5% to 5.6% and fuelling expectations of further tightening in interest rates. The Dow Jones Industrial Average Index rose by 2.5% over April.
Concerns about Germany: the eurozone’s economy managed to achieve positive growth during the first quarter of 2023, expanding by a muted 0.1%. Portugal was the strongest contributor with growth of 1.6%, while Germany flatlined, fuelling concerns about the possibility of recession in the eurozone’s largest economy. Although the rate of consumer price inflation in the euro area dropped from 8.5% to 6.9% year on year during March, core inflation rose from 5.6% to 5.7%. The Dax Index rose by 1.9% during the month.
Clouded outlook for Japan’s manufacturers: as companies in Japan grappled with higher costs for energy and raw materials, sentiment amongst large Japanese manufacturers deteriorated during the three months to March, according to the Bank of Japan’s (BoJ’s) quarterly Tankan survey. Businesses expect Japan’s rate of inflation to remain above the BoJ’s 2% target for the next five years. Over April, the Nikkei 225 Index rose by 2.9%.
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