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High food costs will strain households well into 2024
The UNFAO global food price index has fallen for 17 months but food prices remain far higher than 2013-20
Lower rates will return, amplify and raise challenges
New data over six centuries suggest the trend for lower rates will resume along with the associated policy challenges
AI may take decades to lift economy-wide productivity
It took a generation for full electrification benefits to raise economy-wide productivity; the same may be true for AI
Long commercial property downturn has lasting impacts
Refinancing risks are rising in commercial property; long-run structural changes are hitting office and retail hardest
Fed balance sheet reduction should progress smoothly
The Federal Reserve has reduced its balance sheet by around USD0.8tn since April 2022 but ‘plumbing’ problems are a risk
Demographic-focused policies would raise global growth
China says its population shrank in 2022 while Japan and Europe have raised fears about the impacts of ageing
Tight US job market will keep monetary policy tight
The US labour market is slowing very gradually, keeping wage growth as a key concern for the Fed
Weaker finance context would test all emerging markets
Macroeconomic stability, policy credibility and dollar weakness are improving prospects for most emerging markets (EMs)
Near- and friend-shoring markedly alter trade flows
The United States, Europe and Japan are trading more together and less with China, which is trading more with Russia
Renewed rate rises raise risk of more financial shocks
More rate rises are likely next week from the US Federal Reserve and the ECB
European and US labour productivity has weak momentum
The long-term downward trend in euro-area and US productivity gains is worrying for future GDP growth prospects
US corporate debt distress will rise
A total of 236 US firms filed for bankruptcy in January-April 2023 and filings will rise in the rest of the year
ECB balance sheet reduction raises fragmentation risks
The ECB balance sheet reduction so far has been modest but the pace of the quantitative tightening will rise from July
Strain in emerging market (EM) debt to stay selective
Higher interest rates globally have not yet had a sharply negative impact on many EM sovereigns
Worker shortages and skills mismatches will hit growth
High youth unemployment and rising worker retirements are straining labour markets and productivity
Downside risks to China’s growth target are mounting
China’s leaders know that weak second-quarter growth means more policy action will be needed this year
Prospects for the global economy in H2 2023
Global economic activity will worsen as services slow, with the downturn relatively mild but potentially prolonged
The central banks face an increasingly complex dilemma
Central bank pressures are rising and uncertainties over bank solvency, interest rates and inflation will reduce growth
Weak long-run growth raises risks to the world economy
Global GDP will grow by less this decade than the past unless there is a surprise uptick in productivity
Market turbulence and rising rates weigh on EU banking
Despite high prudential ratios and advantages over their US counterparts, EU banks are not immune to a confidence crisis
Globalisation evolves as FDI and supply chains shift
Friend-shoring is outstripping near-shoring in the remaking of supply chains
Bank regulations cannot prevent a crisis of confidence
Recent events show that higher rates and crashing confidence can push well-capitalised banks to crisis quickly
SVB failure spells contagion but not systemic risk
Major global tech lender Silicon Valley Bank and crypto lender Signature Bank have collapsed in quick succession
The ECB will face a conundrum over its monetary policy
After the latest ECB meeting, investors shifted to believing that tightening might end soon, but this may be optimistic
Dramatic rise in yields raises appeal of global bonds
Bonds are back, attracting increasing investor attention in contrast to more volatile equities
Cost-of-living strains curb Europe’s near-term outlook
Cost-of-living pressures will constrain economic activity in Western Europe in 2023/24 but will ease in the medium term
Key Asia-Pacific trade pact will gain momentum
The Regional Comprehensive Economic Partnership is now in force for 13 out of its 15 signatories
Fed's 2022 rate rises to bite fully this year
Monetary policy works through several channels and has been key to official authorities influencing activity recently
Global minimum tax on corporate profits is going ahead
A global minimum tax on corporate profits is being implemented but market country taxation is on hold
