Global | Controlled slowdown in a turbulent environment

Summary

Looking at the performance of the global economy, it is striking to see the difference between the relative success of central banks and policymakers in achieving a soft landing for both growth and inflation, and the immense uncertainty resulting from the political and geopolitical environment.

Key points

• Key points:
• GDP growth in the United States was higher than expected in the second quarter, although subsequent employment indicators ultimately point to a controlled cooling of the labor market.
• The eurozone is growing slightly less than expected, with persistent differences between manufacturing and services (which happen to be narrowing), and between Germany and the rest of the region. Meanwhile, the factors supporting the recovery in consumption remain firmly in place (rising real disposable income amid falling inflation, wage growth and strong employment), although this had yet to feed through to household spending.
• The Chinese economy continues to show signs of weakness, and it remains to be seen whether the very recent approval of a package of monetary and fiscal stimulus measures will have the desired effects.
• The latest indicators suggest that inflation is continuing to retreat as planned, even with downward surprises due to the impact of lower commodity prices, despite the persistence of services inflation at 4% or more on both sides of the Atlantic.
• All of this has allowed the authorities to bring forward the process of cutting interest rates, with economic policy pointing to a series of gradual cuts to bring rates back to neutral levels by around the third quarter of 2025.

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