Macro
- We expect a global growth slowdown to deepen during the first part of 2024 due to weakening job gains, slowing world trade, tight credit conditions, and accompanying financial stress.1
- We anticipate a sustained recovery in economic growth to begin in the second half of 2024 (led by the U.S.), likely following an economic slowdown cooling inflation to allow the Federal Reserve (Fed) and other central banks to cut interest rates to set the stage for a global recovery.
- We believe that China is grappling with unbalanced, but broadly slowing economic growth, limiting its ability to cushion a global slowdown in the coming months and to support a subsequent global growth recovery.
Domestic
- We expect consumer spending to join housing on the leading edge of the U.S. economic slowdown as a response to rising interest rates, a drawdown of sizable excess cash balances, and to tightening financial conditions pressuring household and corporate finances.
- 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 food and fuel, along with inertia of the CPI’s “sticky” components will likely contribute to a bumpy disinflationary path.
International
- In our view, emerging markets (EMs) will display stronger growth compared to the U.S., despite the impacts from a European recession and China’s weak growth recovery. Nonetheless, EM growth is likely to be subpar due to weak export markets, tight credit conditions, 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 the property slump and excessive debt’s restraint on further borrowing.
1. Economic forecasts are provided by Wells Fargo Investment Institute as of December 31, 2023. Forecasts are not guaranteed and based on certain assumptions and on views of market and economic conditions which are subject to change.