Global economic forecasting: OECD increases inflation expectation

Global economic forecasting by OECD

The OECD emphasized this week that even though economies will suffer, central banks must continue

 to fight inflation.

The organization raised its projections for inflation in 2023 and stated that it anticipates price increases in 2024 to continue over the goals set by many international central banks. The OECD didn't predict a recession, but economies will decelerate because of tighter monetary policy.

Despite a seventh consecutive month of declining activity according to a poll of US manufacturers, another study showed a robust rise in corporate investment. According to a study of eurozone firms, any slowdown may not be as severe as previously anticipated.

In the meantime, the Bank of China lowered bank reserve requirements to support the second-largest economy in the world.

Here are some of the graphs showing the most recent changes in the world economy that were posted this week on Bloomberg:

The World's economy

According to the OECD, global central banks must continue raising interest rates in order to combat widespread inflation even while the economy experiences a significant slowdown. The group increased its predictions for inflation for the following year and stated that, despite the global economy's "substantial growth slowdown," it is not foreseeing a recession.

There were additional significant rate increases this week all throughout the world, including increases of 75 basis points in Sweden, New Zealand, and South Africa as well as increases of the full percentage point in Pakistan and Nigeria. By lowering rates by 150 basis points, Turkey took the opposite tack.

The USA economy

In November, business activity decreased for a fifth consecutive month as demand weakened and inflationary pressures continued to gradually lessen. Orders for commercial equipment from US firms increased in October, according to the S&P Global Flash Composite, suggesting that capital investment plans are still viable despite rising borrowing prices and broader economic uncertainties. Core capital goods shipments increased to their highest level since the year's beginning, pointing to a strong start for the fourth quarter's gross domestic product. The ng managers' index dropped to its second-lowest point since the pandemic's immediate aftermath.

The European economy

As record inflation slows and production expectations rise, businesses in the eurozone are noticing flimsy indications that the region's economic downturn may be ending. S&P Global reports that an indicator of industrial and service activities unexpectedly increased in November.

As the Nordic nation grapples with the worst property recession in three decades, Sweden's home prices fell even more in October, providing a preview of what many other wealthy nations may face in the future.

The Asian economy

China's central bank reduced the amount of cash lenders must keep in reserve for the second time this year, providing more support to an economy beset by soaring Covid cases and a persistent property slowdown. The reserve requirement ratio for the majority of banks was lowered by 25 basis points by the People's Bank of China.

In China, there are increasing indications that local government debt loads are becoming unmanageable. The stockpile of outstanding bonds held by China's 31 province governments is almost at the danger limit of 120% of income set by the Ministry of Finance. The property crisis is a significant contributor to the financial crunch.

During its 30-month trade dispute with China, Australia has invested heavily to woo large numbers of Indian tourists to its coasts, struck a free-trade agreement with post-Brexit Britain, and discovered new Middle Eastern markets. Still, exporters have suffered significantly outside of iron ore and other important commodities.

The Emerging markets economy

According to swap markets, Chile is expected to lead the world into a sharp interest rate-cutting cycle in 2019 as inflation drops and its economy experiences a boom-to-bust transition. After a surprise inflation reading last month and as the economy teeters on the brink of recession, traders are predicting more than 5 percentage points in cuts over the following 12 months.

Leading Mexico's export surge are shipments of boats, automobiles, and computer components, which demonstrates rising US demand for industrial goods from its southern neighbor. The fastest-growing product from Mexico worth more than $100 million was boats, which saw a 266% growth in exports in September compared to a year earlier.

Global economic forecasting
Global economic forecasting

Courtesy Moneyweb

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