Global Growth Fragile

Business Confidence Stays Low in August. Prospects for 2024 Dim


 
The threat of global recession in the fourth quarter of 2023 remains, as the August Sales Managers Survey data shows the USA and China (although both showing modest growth overall) are also both looking increasingly fragile as interest rate pressures mount. The Indian economy continues to grow, but is much smaller than the two mega engines of the US and China that have propelled global economic activity so far, and so fast, for so long.

The big three (China, the USA and India) together have provided close to 60% of all global growth over the past decade, so their steady recovery from the dire straits of Covid has been good news. However growth overall has been modest in 2023 to date, particularly in China, previously the biggest contributor. And rapid (and in many cases unexpected) rises in interest rates are now causing problems in many sectors and countries.


It's too early to suggest that global economic recession is about to envelop the world. But there is no doubt that China has been the primary motor of global growth over the past four decades, so the current very hesitant revival of economic activity in China is inevitably a negative sign for growth expectations for the remainder of 2023.

With signs of weakness now also emerging in the USA (the Sales Managers Business Confidence and Staffing Indexes both registered sub 50 numbers in August, and the Prices Charged Index came in with a 17 month high), the prospects for economic growth in the fourth quarter of 2023 and for 2024 are looking increasingly limited.

The good news is that price inflation is coming down to more normal levels globally, and should assist in rebuilding confidence in the financial markets.

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