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

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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