11 September 2024
Summer 2024 was an eventful one. While many people were on their holidays we had a combination of big market moves, worries about recessions, geopolitical uncertainty, and shifting prospects for the US presidential election race.
But, beneath the headlines, the global macro data have, largely, ticked along. Worries are aplenty about the state of the US labour market, but after the August data, which were more sanguine than in July, those concerns may fade slightly.
The broader suite of US labour market data is less alarming than the rise in the unemployment rate, in any event. Employment growth has slowed but layoffs are low (Chart 1), the spike in initial jobless claims appears to have been seasonal and consumers have kept spending on a range of products. Confidence may be a little subdued, but the world’s largest economy keeps growing steadily (Chart 2).
Source: Macrobond
Source: Macrobond
The same can’t be said everywhere. Chinese growth data continue to disappoint, particularly on the consumption side, and more policy support is likely to be needed to achieve the 2024 growth target.
In Europe, growth remains a problem in Germany (but not in Spain) with the industrial data, in particular, posing a challenge. Labour markets are still tight, though, and real wage growth should continue to prop up consumer spending.
The global inflation picture is mixed, but broadly improving. The US has seen a notable drop in inflation over the past three months (Charts 3 and 4), and although we haven’t seen the same moves across the board, many central banks have now seen enough to start, or continue, their easing cycles. For the Federal Reserve, the question is now about the pace of easing – with labour market data set to take on an even greater focus in the coming months.
Source: Macrobond
Source: Macrobond
For most central banks the question is how quickly they will cut rates, which depends on the data. In some economies, like Canada and Sweden, policymakers have already turned much more dovish given lower inflation and weaker growth data. In contrast though there has been a clear warning sign from Brazil, where currency weakness and fiscal concerns have prompted a change in tune, and the next move for rates is likely to be up.
And now, the US Presidential election comes into focus. With two months to go until 5 November, the polls suggest a very close race for both the presidency and control of Congress. The outcome of the vote will have an impact on growth and inflation scenarios going into 2025.
Source: Bloomberg, HSBC
⬆Positive surprise – actual is higher than consensus, ⬇ Negative surprise – actual is lower than consensus, ➡ Actual is in line with consensus
Source: LSEG Eikon, HSBC
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