JPM with its global growth tracker.
A weaker-than-expected 1.6%ar US GDP gain last quarter reduced our tracking estimate for 1Q24 global growth to 3.1%ar.
But this disappointment does not temper our confidence that global growth is likely to maintain an above-potential pace as it builds a broader and more sustainable base.
Signs of this broadening are now evident in a pickup in global trade flows.
However, available activity data do not yet confirm two key sources of lift we believe are behind this move—a modest rebound in global business spending and a rebound in Western European consumers.
But the signals from our global capex nowcaster and business surveys are that this lift is underway (Figure 1).
This week we raised GDP forecasts for both the Euro area and UK in response to the step up in the April flash PMI.
Slower government spending growth and a rise in consumer energy prices contributed to a slowing in US growth last quarter but GDP details show the US expansion stands on strong footing and will remain a positive for global demand.
A net trade drag related to a rebound in imports is a key contributor to the 1Q24 moderation (Figure 2).
Looking past trade and inventories swings, domestic final sales have been tracking a steady 3%ar gain in recent quarters.
Importantly, the US consumer shook off large income drags from rising taxes and inflation last quarter as the household saving rate fell further.
Rather than a source of concern, we view this fall as a reflection of healthy fundamentals as both wealth and labor income are rising at a strong pace.
Our US team responded to this news by raising its forecast for current quarter GDP growth to 2.5%ar.
They expect next week’s April employment report to show continued strong job gains (250k).
This still looks like a classic soft landing. Slowing jobs markets are rebalancing, and wage growth is easing over time, which should bring down the bugbear of services inflation.
However, if we see an acceleration of growth that stalls this process, which has been a rising possibility over the past month, then labour markets in the US (and nowhere else, really) will be too tight.
The Fed is unlikely to pivot to hikes, but long-end rates will keep rising and do the work for it as risk assets fall.
