The International Monetary Fund warned: “The worst is yet to come” as it predicted that more than one third of the global economy is set to contract in 2023, including the US, the EU and China.
- The US economy grew by 2.6% YoY during Q3
- The ECB implemented a 75bp increase in interest rates
- Eurozone inflation reached double digits
IMF cuts growth forecasts: the International Monetary Fund (IMF) warned: “The worst is yet to come” as it predicted that more than one third of the global economy is set to contract in 2023, including the US, the EU and China. The IMF reduced its forecast for global economic growth from 2.9% to 2.7% in 2023, citing the impact of Russia’s invasion of Ukraine, the cost-of-living crisis, and China’s economic slowdown.
“President Joe Biden maintained that he did not expect the US economy to slip into recession”
Fed remains vigilant: the Dow Jones Industrial Average Index rose by 14% during October and experienced its best month since January 1976, boosted by hopes that the Federal Reserve (Fed) might start to moderate the pace of its tightening measures. Nevertheless, recent minutes from the Federal Open Market Committee warned that “the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action”. Although the annualised rate of inflation eased slightly in September from 8.3% to 8.2%, this was still higher than expected, underpinned by double-digit food price inflation.
US midterms approach: the US economy grew at an annualised rate of 2.6% during the third quarter. Activity was boosted by an increase in exports that is, however, unlikely to prove sustainable in the face of persistent strength in the US dollar . Ahead of the US midterm elections in November, President Joe Biden maintained that he did not expect the US economy to slip into recession, but any recession that did occur was likely to prove relatively small.
ECB tightens again: the European Central Bank (ECB) raised its key interest rate by 0.75 percentage points to 1.5% during October and flagged further increases over coming months to address the problem of ongoing inflationary pressures. The eurozone’s rate of consumer price inflation was estimated to have risen from 9.9% in September to 10.7% in October. The ECB expects the eurozone’s economy to grow by only 0.9% in 2023. After a tough September, the Dax Index rebounded by 9.4% during October.
Question-marks over China’s growth outlook: although China’s economy grew by 3.9% during the third quarter, investor sentiment was undermined by the ruling Communist Party’s 20th National People’s Congress in which President Xi Jinping’s leadership was reaffirmed for another term. The yuan continued its decline against the US dollar during the month and the Shanghai Composite Index fell by 4.3%.
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