- The Bank of England raised its benchmark interest rate to 5.25% despite a slowdown in consumer-price rises, leading to speculation about when the central bank will end its monetary tightening.
- House prices in Britain fell by 3.8% in July compared to the same month last year, the sharpest decline since July 2009, but the average house price was still higher than earlier this year.
- The Bank of Japan raised its cap on the yield of Japanese ten-year government bonds from 0.5% to 1%, causing the yield to soar to nine-year highs.
- Turkey's annual inflation rate increased to 47.8% in July, the first rise since October, due in part to a new tax on fuel.
- The euro area's economy grew by 0.3% in the second quarter, with much of the growth attributed to changes in intellectual property shifting by multinationals based in Ireland for tax purposes. Germany's GDP growth rate was zero, and Italy's fell by 0.3%.
### Summary
Investor Jeremy Grantham warns that the U.S. will experience a recession next year due to the Federal Reserve's interest rate hikes and unsustainable asset prices.
### Facts
- Grantham believes the Fed's previous predictions and actions have been wrong, and it has failed to predict recessions in the past.
- He argues that the economy is still feeling the impact of the Fed's interest rate hikes, which are increasing borrowing costs and depressing real estate prices.
- Grantham criticizes the Fed for stimulating asset price bubbles with low interest rates and aggressive purchases of securities.
- He predicts that the unsustainable growth in asset prices and a lack of investment in key raw materials will lead to a recession.
- Economist David Rosenberg shares Grantham's bearish outlook and warns of headwinds to the U.S. economy, including China's economic issues and the end of the U.S. student debt relief program.
- Both Grantham and Rosenberg have had to push back their recession predictions but remain convinced that rising interest rates will eventually lead to an economic downturn.
### Summary
📈 The Malaysian government is confident in meeting its GDP forecast of four to five percent for 2023, as the domestic economy continues to show healthy trends.
### Facts
- 📊 Prime Minister Anwar Ibrahim states that the government is confident in achieving the four to five percent GDP forecast for 2023.
- 💪 Multiple indicators demonstrate a vibrant domestic economy with healthy growth trends.
- 💼 Anwar, who is also the finance minister, emphasizes the government's commitment to supporting the momentum of domestic growth.
- 💰 Efforts will be made to ensure a conducive business environment and attract both domestic and foreign investments.
- 🌍 The government will focus on developing strategic sectors to drive economic expansion, including digitalization and sustainability initiatives.
- 💼 Anwar believes that these measures will contribute to a strong and resilient Malaysian economy in the coming years.
UK PMI data suggests a 0.2% decline in GDP in Q3, indicating a potential recession as factory output slumps and the economy faces higher interest rates.
Germany's business activity has seen a sharp decline, leading to concerns of a recession, as the country's Purchasing Managers' Index (PMI) dipped to its lowest level in over three years. This decline in activity is impacting the wider eurozone economy as well, with the region at risk of slipping into recession. This economic downturn is accompanied by a worrying uptick in inflation and slow growth, particularly in Germany.
Recession fears return as a key business survey shows a significant contraction in the UK economy, signaling the detrimental effects of interest rate rises on businesses and heightening the risk of a renewed economic downturn.
European Central Bank policymakers are increasingly concerned about deteriorating growth prospects and there is growing momentum for a pause in rate hikes as major economic indicators come in below expectations, suggesting a recession is now a distinct possibility.
Germany's economy stagnated in the second quarter of 2023, but it has officially emerged from the recession; however, the Bundesbank predicts that the economy will continue to stagnate in the third quarter and the IMF forecasts that Germany will be the only major advanced economy to shrink this year.
Concerns of a stock market crash are growing as economists await the release of the second-quarter GDP report, which could provide insight into the impact of the Federal Reserve's rate-hike campaign and future monetary policy changes. The report may have a significant effect on equity markets, which have been sensitive to economic data releases this year.
Forecasters have decreased their growth expectations for China due to deflation, rising youth unemployment, and a property-market crisis, with GDP predicted to rise by only 5.1% in 2023 and 4.5% in 2024.
The UK's Office for National Statistics has revised its estimate for the size of the economy at the end of 2021, suggesting a stronger recovery from the COVID-19 pandemic than previously thought, with the economy in the fourth quarter being 0.6% larger than in the final quarter of 2019.
Fidelity International's Salman Ahmed maintains his prediction of a recession next year, citing the full impact of the Federal Reserve's monetary policy tightening and a wave of corporate debt refinancing as leading factors.
Revisions to economic data by the Office for National Statistics (ONS) have revealed that the UK economy was 0.6% larger at the end of 2021 than previously estimated, improving the country's performance relative to its peers in the G7. The revisions also highlight the impact of stockpiling in 2020 and indicate stronger growth in 2021, particularly in sectors such as wholesale trade and health services. However, while the revisions provide a more positive outlook, the UK's economic narrative remains relatively mediocre compared to pre-pandemic levels.
JPMorgan revises its inflation forecast for Turkey to 65% from 62%, with expectations that the annual rate will peak at 73% in May 2024, due to higher-than-expected inflation data for August.
Goldman Sachs has lowered its probability of a U.S recession in the next 12 months to 15% due to positive inflation and labor market data, while also predicting a reacceleration in real disposable income and expecting the Federal Reserve to keep interest rates unchanged.
HSBC economists predict that higher borrowing costs will lead to a decline of more than 1% in the euro zone's GDP by 2025, potentially causing a recession, although the British economy is expected to be less affected due to government-backed loans and healthy balance sheets.
Goldman Sachs chief economist Jan Hatzius has revised his forecast for a U.S. recession in 2023, lowering the probability from 35% to 15% due to positive inflation and labor market news, while still expecting a mild economic slowdown.
Despite previous concerns about the UK economy, revised GDP data shows that the economy had already recovered to its pre-Covid size in 2021, indicating that Brexit's impact on the economy has been weaker than previously thought.
The US economy is facing a looming recession, with weakness in certain sectors, but investors should not expect a significant number of interest-rate cuts next year, according to Liz Ann Sonders, the chief investment strategist at Charles Schwab. She points out that leading indicators have severely deteriorated, indicating trouble ahead, and predicts a full-blown recession as the most likely outcome. Despite this, the stock market has been defying rate increases and performing well.
The German economy is predicted to contract in 2023, with a forecasted shrinkage of 0.4%, primarily due to the impact of the Ukraine war and rising energy prices.
UK gross domestic product (GDP) fell by 0.5% in July, below expectations, with services output being the main drag on the economy, indicating a potential mild recession, and causing investment banks to revise down their growth forecasts; however, some experts still believe that the economy is growing, albeit at a slower pace.
The UK's GDP has contracted more than expected in July due to strikes, adverse weather, and a decline in retail trade, with a 0.5% decrease, although the broader picture indicates growth across various sectors; meanwhile, wages have risen by 7.8% and unemployment has increased to 4.3%.
Stock indices closed higher today, with the Nasdaq 100, S&P 500, and Dow Jones Industrial Average all posting gains, while the healthcare sector lagged behind; the U.S. 10-Year Treasury yield increased, and the Atlanta Federal Reserve lowered its GDP growth estimate for the third quarter. Additionally, Fitch Ratings revised its global growth forecast for 2023 due to concerns about China's real estate sector, and economic data showed an increase in wholesale inflation and retail sales.
J.P.Morgan and ANZ have raised their 2023 economic growth forecast for China to 5% and 5.1% respectively, citing a notable recovery in retail sales and a rise in service activity.
Goldman Sachs warns that three factors - the resumption of student loan payments, the autoworkers' strike, and a potential government shutdown - could lead to a significant slowdown in US GDP growth during the fourth quarter of 2023.
The Federal Reserve has left interest rates unchanged but indicated the possibility of one more rate hike, causing U.S. markets to slump and Treasury yields to rise, while European markets saw gains; Instacart shares sank, Klaviyo shares jumped, and Arm shares continued to slide; UK inflation for August was lower than expected, throwing the Bank of England's next move into question; Goldman Sachs has raised its 12-month oil price forecast to $100 per barrel.
The UK economy is predicted to continue its stagnant state in 2024, with some economists and business groups even foreseeing a recession, while others, including the Bank of England, the IMF, and the OECD, anticipate modest growth despite high interest rates and a slowing global economic outlook. Different factors, such as labor hoarding and regions bucking the trend, complicate the overall picture, but overall, a stagnant or minimally growing economy seems likely.
German economic institutes are predicting that the country's GDP will contract by 0.6% in 2023, due to rising interest rates and high inflation, causing slower recovery in industry and private consumption.
Deutsche Bank's economists are still predicting a US recession despite the ongoing resilience of the economy, pointing to rapidly rising interest rates, surging inflation, an inverted yield curve, and oil price shocks as the four key triggers that historically have caused recessions and are currently happening.
Despite ongoing concerns about lackluster growth, revised data shows that the UK's economy has grown faster than originally estimated since the start of the COVID-19 pandemic, outperforming France and Germany.
The World Bank predicts a growth rate of 5.1% for China's economy this year, but has downgraded its growth forecast for 2024 due to China's faltering post-COVID bounce, elevated debt, weakness in the property sector, and structural factors.
Goldman Sachs has revised its forecast for mortgage rates, predicting that they will be higher than previously expected, with rates of 7.1% by the end of 2023 and 6.8% by the end of 2024, due to the Federal Reserve's decision to maintain benchmark interest rates and concerns about inflation, leading to a decrease in mortgage applications and homebuyers being priced out of the market.
JPMorgan Chief Market Strategist predicts a recession and discusses the Federal Reserve's stance on interest rates and the performance of mega-cap versus mid-sized stocks.
A new report warns that a recession may be imminent as employment, business optimism, and output continue to decline, with companies struggling to maintain staffing numbers and cope with higher borrowing costs and weaker customer demand.
Goldman Sachs economists warn that the recent surge in US Treasury yields will hamper economic growth and pose financial risks, though the bank does not predict a recession; they estimate a 0.5 percentage-point blow to US GDP over the next year.
Germany is projected to experience a deeper recession than previously forecasted, with its economy expected to contract by 0.5% this year due to inflation, manufacturing decline, weakness in interest-rate-sensitive sectors, and slower trading-partner demand, according to the International Monetary Fund (IMF).
The IMF predicts that the world economy will grow at a slower pace of 2.9% in 2024 due to ongoing risks from higher interest rates, the war in Ukraine, and the eruption of violence in the Middle East, highlighting the need for tight monetary policy to combat inflation.
The UK GDP YoY growth rate is in line with expectations, showing a positive response to July's contraction, while the three-month average also meets forecasts, indicating a choppy economic outlook domestically and internationally as global growth slows down.
The UK economy's marginal growth in August has led to expectations that interest rates will remain unchanged next month, with analysts describing the figures as lacklustre and warning of the negative impact of higher borrowing costs and the higher cost of living on consumers and businesses. The economy is currently not in recession but concerns over weak growth persist, making it a key issue in the upcoming election.
Germany has revised its economic forecast for 2023, projecting a 0.4% decline in GDP due to the energy price crisis, inflation concerns, and weakening global economic partners, such as China.
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