NEW REPORT Global economic outlook midyear update: The art of muddling through Today we publish our midyear global economic outlook - which adds 2027 projections and compares where we are now versus January, and discusses what has changed during H1. Three themes: - At mid-year, the global economic outlook is weaker than at the start of the year – mainly due to renewed protectionism in the United States, which has jarred global trade and generated widespread policy uncertainty. - But as long as the US manages to avoid a recession (25% risk), the global economy looks set for continued – albeit unspectacular – expansion, as past energy shocks fade and central banks further ease monetary policy. - If no new risks materialise, increased public spending on infrastructure and defence can support global trade and production and further narrow the transatlantic growth gap, which had already started last year. Link to the full report below peelhunt.s3.amazonaws.com/25… #economy #macro #fed #boe #useconomy #usmacro #ukeconomy #ukmacro #china #japan #eurozone #ecb #trump

Happy Friday! This week’s chart of the week is an optimistic one and follows on from the positive surprise in first quarter UK GDP data. It shows that—I suspect to the surprise of many readers and in contrast to the stagnation narrative that prevails in the press—real GDP growth has averaged 1.9% annualised since November 2023. Compared to what is historically normal for the UK, that pace of growth is unremarkable—but by no means poor, either. It matters, however, because it offers a glimpse of what is possible under mostly normal conditions—that is, absent the kinds of shocks that have repeatedly hit the UK in recent years. That was not normal: The 2020 to 2023 period included three enormous shocks: the COVID-19 lockdowns; the Russian invasion of Ukraine and ensuing gas supply disruptions; and a +500bp tightening of monetary policy from the Bank of England (BoE). Unsurprisingly, economic performance suffered badly—a huge gyration in output during 2020-21 was followed by near-stagnation in 2022 and H1 2023. But once these shocks began to fade in the second half of 2023, economic activity started to rebound. Off to a spluttering start, again: The major problem with the ongoing expansion is that it is happening in fits and starts. In late 2023 and the first half of 2024 the UK enjoyed healthy momentum before growth stalled last autumn. Since November last year, activity has picked up again. These irregular bursts of activity, set against a still uncertain global trade backdrop and worries that taxes need to rise even further, challenge the hope that the future will produce the kind of steady growth that gives markets and businesses the confidence to take risks and invest. But, a difficult start to an upswing after major shocks is normal. Just look at the early period of recovery following the Global Financial Crisis and subsequent Eurozone Debt Crisis: UK momentum was lumpy for a number of years before it steadied and, ultimately, turned into a long period of growth with an average annualised rate of 2.1% (mid-2009 to end 2019). Caution can be hard to shake: The fate of the UK economy over the coming months hinges more on the willingness than on the underlying ability of consumers and businesses to continue to spend and invest. Households benefit from strong real wage growth, high savings rates and low levels of debt, while businesses enjoy high cash balances and manageable debt levels. However, after years of unusual shocks, consumers and businesses are skittish—the worry is that, as we saw in 2H24, rising uncertainties may trigger a lurch towards more precautionary behaviour again. But, even under that scenario, I doubt the softness would last long. In life, as in economics, sometimes it is just hard to get going. But once you start to build momentum, further progress becomes easier. #ukeconomy #ukmacro #ukgdp #macro