Developed economies are in transition, with high inflation falling back to target and growth picking up, according to a macroeconomic report from Nordea bank strategists.
The report covers the economic outlook for the Eurozone, US, China, as well as key central bank policy. Here are the key takeaways:
Transition Phase
“We are still in a phase of transition in the big economies. We continue to expect that we will see slightly weaker labor markets, inflation moving towards the 2% target and interest rates being slowly cut in both the US and the euro area, combined with slightly higher economic growth in Europe but somewhat lower growth in the US. None of these things have clearly materialized yet, but data releases and central bank comments during March continue to point in that direction.”
“The US labor market continues to show robust job growth but not as robust as previously thought, as the very high January number was revised down. The job growth is supported by a growing work force and indicators still point to a slightly easing pressure in terms of job vacancies.”
“The European Central Bank is clearly signaling an intention to cut rates in June. The bank seems confident that inflation is moving in the right direction, and that impression was largely supported by the preliminary March figures. However, it is still concerned that wage growth could be a hindrance for sufficiently low inflation, and the euro area wage data for Q1 will not be available before the ECB rate decision on April 11. Hence the comment from ECB President Lagarde that “we will know a little more in April but we will know a lot more in June.”
“China published a GDP growth target of 5.2% for 2024. That is the same growth rate as last year but in reality quite ambitious as that growth rate came on the background of a very weak 2022 with extensive COVID lockdowns. Hence, we expect to see significant policy stimulus to Chinese growth this year
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