Schroders Economics Lens Q1 2024

Schroders Economics Lens is a chart-pack guide to the global macroeconomic outlook.

It is published quarterly and illustrates the latest economic forecasts and views from Schroders economics team. The Lens includes analysis of the outlook for growth, inflation, and interest rates, as well as topical issues. This quarter we look at the immaculate disinflation, the consensus shift from ‘hard landing’ to ‘soft landing’ in the US, and what to watch ahead of US elections.

Click here to download your Q1 copy. Schroders Q1 Economic Lens

2024 Consensus US GDP and inflation forecasts, year average (%)

Source: LSEG Datastream, Schroders Economics Group. 21 February 2024.

Summary:

• New baseline forecast – Global GDP growth forecast revised up to 2.6% from 2.2% for 2024, and to 2.7% from 2.2% for 2025.
• An immaculate disinflation, whereby inflation moderates while economic activity continues to grow and unemployment remains low, appears to be playing out.
• The US economy has proven to be far more resilient, all whilst inflation has continued to moderate. The eurozone has avoided a technical recession, but manufacturing heavy countries such as Germany are struggling. The recession-marred UK economy is likely to see a sluggish recovery through 2024, largely owing to more sticky inflation and structural supply problems.
• China is seeing a near-term improvement in the external outlook, but underwhelming support from fiscal policy is likely to mean weak household demand will come to the fore as government spending fades.  
• Falling inflation should allow the Federal Reserve to start cutting its policy rate this summer. However, Schroders’ baseline forecast only has 100 basis points of cuts between now and the end of 2025 – materially behind market expectations.
• As inflation continues to fall, central banks have started to change the tone of their communications. References to upside interest rate risks have largely been removed, while discussions of downside risks remain. Expectations are building that interest rates will be lowered as we progress through 2024, but there are still questions over how much easing will follow.
• Our risk scenario analysis examines the impact of potential events and risks around the underlying forecast assumptions. Overall, the balance of risks are skewed towards higher growth and inflation – the first time since the third quarter of 2020.

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The latest Economic and Strategy Viewpoint, which includes a more detailed discussion of our latest economic views, forecasts, and scenario analysis, is available in full here.