The International Monetary Fund presented today its quarterly World Economic Update. The IMF signalled that, the US using short-term debt is cheaper but also riskier 'while wage growth with weak productivity gains may make it difficult for firms to moderate price increases'.
- International Monetary Fund sees US 2024 GDP growth level at 2.6%, slightly down from 2.7% in April. The 2025 forecast was unchanged at 1.9%.
- Eurozone GDP yearly GDP growth was lifted to 0.9% from 0.8% in April; 2025 forecast unchanged at 1.5%
- Chinese GDP growth was also lifted to 5% from 4.6% in April due to perspective of stronger consumer spending in the second half of the year. IMF also lifted China 2025 expected GDP to 4.5% vs 4.1% previously
- Despite that, IMF informed that weak China Q2 2024 poses some downward risk to this projection
- Global real GDP for 2024 was unchanged at 3.2% while 2025 perspectives were lifted to 3.3%, from 3.2% projected in April
- Japan 2024 GDP cut to 0.7% from 0.9% in Aprils on auto disruptions
IMF Chief Economist Gourinchas sees only one Fed rate cut this year, while markets 'speculate' about even 3 cuts, since the September meeting. He commented also global economy
- With a strong labour market, the Fed is in a position to wait a bit on rate cuts to see if CPI data continues to ease.
- It's natural for US Fed to look closer at labour market and not overdo it with tight monetary policy. I still anticipate one Fed rate cut later this year.
- Global disinflation momentum is slowing with higher inflation in services prices, brisk nominal wage growth
- China needs to restore household confidence, resolve property crisis to boost domestic consumption
- Strong outcome of wage talks likely to support turnaround in Japan consumption 2H 2024
- Bank of Japan faces challenge in ensuring price stability in a short to medium-trend
BofA Global Fund Managers Survey highlights
- US monetary policy is too restrictive, say 39% of investors; monetary policy the most restrictive since November 2008
- Geopolitics replaces higher inflation as the top-tail risk.
- Long magnificent 7 named the most crowded trade by a country mile. Investors remain bullish, driven by expectations for Fed rate cuts and a soft landing.
- Global growth expectations fall -27% from -6%, the largest drop since March 22
- 68% of investors see a soft landing, 18% see no landing, & 67% expect no recession in the next 12 months
US Macro data
US NAHB Index for June came in 42 vs 43 exp. and 43 previously and US business inventories came in 0.5% MoM, in line with expectations and report for May
