Slowing Global Economic Growth is Increasingly Evident, High-Frequency Data Show
IMF Blog, November 14, 2022
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- Authors: Tryggvi Gudmundsson
- Published: November 14, 2022
Major headwinds to global growth
- Russia’s invasion of Ukraine.
- Interest rate increases to contain inflation.
- Lingering pandemic effects, including China’s lockdowns and disruptions in supply chains.
- Interactions of these shocks contributing to broad-based slowdown.
Key findings from recent analysis and high-frequency indicators
- The latest World Economic Outlook lowered the global growth forecast for next year to 2.7 percent.
- Countries accounting for more than one third of global output are expected to contract during part of this year or next.
- Recent high-frequency indicators, including purchasing manager indices (PMIs), confirm a gloomier outlook.
- PMI readings for a growing share of G20 countries have fallen from expansionary territory earlier this year to levels that signal contraction, affecting both advanced and emerging market economies.
- Gross domestic product releases for the third quarter surprised on the upside in some major economies, but October PMI releases point to weakness in the fourth quarter, particularly in Europe.
- In China, intermittent pandemic lockdowns and the struggling real estate sector are contributing to a slowdown evident in PMI data, investment, industrial production, and retail sales; this slowdown will have a significant impact on other economies because of China’s large role in trade.
Policy implications and recommendations
- Policymakers should continue to prioritize containing inflation, given its contribution to a cost-of-living crisis and disproportionate harm to low-income and vulnerable groups.
- The macroeconomic policy environment is unusually uncertain.
- Continued fiscal and monetary tightening is likely needed in many countries to bring down inflation and address debt vulnerabilities.
- Further tightening in many G20 economies is expected in the months ahead.
- Such policy tightening will continue to weigh on economic activity, especially in interest-sensitive sectors such as housing.
- Careful policy action and joint multilateral efforts can help move the world toward stronger and more inclusive growth.
Tryggvi Gudmundsson — November 14, 2022