Macro
- We anticipate a global growth slowdown to gather momentum this year due to weakening job gains, subdued world trade, tight credit conditions, and accompanying financial stress.1
- We expect inflation to cool enough to allow the Federal Reserve (Fed) and other central banks to cut interest rates and to set the stage for a mild global economic growth recovery (led by the U.S.) later in the year.
- We believe that China is grappling with unbalanced, but broadly slowing economic growth, limiting its ability to cushion a global slowdown or a subsequent global growth recovery.
Domestic
- We expect fading post-pandemic supports and a wind-down of consumer spending to result in a gradual U.S. economic slowdown, cushioned by lingering post-pandemic supports and financial conditions more accommodative than usual in the late stages of an economic cycle.
- We believe inflation, as measured by the Consumer Price Index (CPI), will slow with the economy as supply shocks continue to unwind and demand softens. However, tight supplies of fuel and food, along with inertia of the CPI’s “sticky” components (primarily rents within services) will likely contribute to a bumpy disinflationary path and firming inflation into 2025.
International
- In our view, emerging markets (EMs) will display stronger growth compared to the U.S., despite the impact of a European recession and China’s weak growth recovery. Nonetheless, we believe EM growth is likely to be subpar due to weak export markets, tight credit conditions, still elevated inflation, and a strong U.S. dollar.
- Support from China’s economic recovery likely will be muted by its tilt toward less export-intensive, consumer-led growth through much of 2024, along with deflationary headwinds, the property market slump, and government restraint on further borrowing due to high debt loads.
1. Economic forecasts are provided by Wells Fargo Investment Institute as of March 31, 2024. Forecasts are not guaranteed and based on certain assumptions and on views of market and economic conditions which are subject to change.