Economists grow gloomier on 2024 as central banks delay rate cuts

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Source: Financial Times

Combination of stronger US economy in 2023 and stickier inflation trigger downgrades for next year.

Persistently higher interest rates in major economies mean global growth is likely to slow next year after outperforming expectations so far in 2023, economists say.

Output will expand 2.1 per cent in 2024, according to an aggregation of forecasts by the consultancy Consensus Economics, down from the 2.4 per cent the economy is expected to log this year.

Economists have upgraded their expectations of this year’s performance by 1 percentage point since the start of the year because of unexpectedly strong consumer demand and labour markets.

Part of the 2024 slowdown will be the result of “some basic arithmetic effects”, of better output this year flattening growth next, said Simon MacAdam, senior global economist at Capital Economics. However, he added that economists had also “genuinely become more downbeat about prospects in 2024”.

The caution centres on the belief that persistently high demand will keep inflation higher for longer, forcing rate-setters in advanced economies to keep borrowing costs elevated well into next year.

“Services demand continued largely unabated, the labour market has stayed strong, wages have continued to rise,” said Nathan Sheets, chief economist at US bank Citi. “Some of the weakness [anticipated for this year] is being pushed in to 2024.”

In many countries, including the US, “there will be a recession, it’s just going to come later”, said Sheets.