Take Two: World Bank warns on global economic growth; US inflation accelerates
What do you need to know?
The global economy is on track to deliver its weakest half-decade performance in 30 years, partly because of higher borrowing costs, the World Bank cautioned in a new report. Trade growth is predicted to be half the average in the decade prior to the pandemic while economic growth is forecast to slow from 2.6% last year to 2.4% in 2024 - AXA IM expects 2.8%. However, the World Bank noted the global economy is still in a better place than a year ago as the risk of recession has receded although geopolitical tensions remain a threat. It said transformation can be achieved if governments act now to accelerate investment and strengthen fiscal policy frameworks.
Around the world
US annual inflation rose more than expected to 3.4% in December from 3.1% the month before, its first acceleration since August. Analysts had expected price increases of 3.2%. Core inflation, excluding food and energy costs, rose 3.9% - less than November’s 4.0% but still more than the 3.8% consensus expectation. The data could have an impact on the timing of interest rate cuts - Federal Reserve officials noted at their December meeting that rates may need to remain high until inflation is “clearly moving down sustainably” towards the 2% target. In China meanwhile, deflation persisted with the Consumer Price Index falling -0.3% year on year.
Figure in focus: 6.4%
Eurozone unemployment eased to a joint-record low in November, indicating the bloc’s job market was more resilient than expected. Unemployment decreased to 6.4% in November – echoing June’s total - from 6.5% in October. While this was better than the market’s expectation of an unchanged rate, it comes against a backdrop of weak growth - the Eurozone economy shrank 0.1% in the third quarter (Q3) of 2023. Lower unemployment could increase wage pressures, adding to inflation concerns for the European Central Bank as it weighs up when to start cutting interest rates.
Words of wisdom
Global Lighthouse Network: A community of manufacturers using new technologies to transform factories, value chains and business models. Set up by the World Economic Forum, the network aims to boost collaboration between industry leaders and increase productivity while prioritising sustainability. Some 21 new members were announced in December, taking the total to 153. Meanwhile, 2023 was confirmed as the hottest year on record, at 1.48°C warmer overall than the long-term pre-industrial average, the European Union’s climate change service said. The increase was driven by human-caused climate change, as well as a persistently strong El Niño weather event.
What’s coming up?
On Monday, Germany publishes its 2023 full year GDP growth data, while the Eurozone reports industrial production figures for November. In the US, Monday also sees the Iowa caucus - the start of the Republican primary process and de facto start to the Presidential election on 5 November. On Tuesday, the UK announces its November unemployment rate and Canada reports inflation data – the Eurozone and the UK follow with their own numbers on Wednesday, when China reports Q4 GDP growth. On Friday, Japan issues its inflation rate for December. Additionally, the World Economic Forum annual meeting in Davos runs from Monday to Friday this week, where participants will convene to discuss critical global challenges under the theme of rebuilding trust.