Recession risk hits U.S. and Europe
SHORT-TERM TRENDGrowth concerns increase with policy hawkishness
Global economic activity continued to slow. Inflation increased, and central banks remained hawkish. U.S. purchasing manager indexes (PMIs) deteriorated noticeably during June, and new orders for manufacturing and services moved into contractionary territory. Data also weakened in Europe, as slowing spread from manufacturing to services. Deceleration in U.K. growth continued at a moderate pace, but labor market tightness eased a bit. Central Europe, the Middle East, Africa, and Latin America markets also slowed. Exceptions to slowing were in Asia. Japan's business activity rose solidly in June, with services PMI at the highest level since 2013. In China, May activity surprised slightly to the upside, and both exports and imports bounced back. As China's Covid-related mobility restrictions eased in June, PMIs moved to expansion.
LONG-TERM CYCLEThis six-year illustration shows stable GDP up until the collapse from the coronavirus pandemic.
Feb '20–April '20The Covid-19 pandemic causes a global economic downturn.
May '20–Dec '21Global growth starts to surge and stays at elevated levels as life continues to normalize.
Jan '22–presentRising interest rates and inflation, and the fallout from the Russia-Ukraine War cuts global growth prospects.
Source: Putnam. Data as of June 30, 2022. We base our Global GDP Nowcast on a tailored methodology that captures daily data releases for the most essential growth characteristics for each of 25 countries — including purchasing managers' index data, industrial production, retail sales data, labor market metrics, real estate price indexes, sentiment indicators, and numerous other factors. The mix of factors used for each market may change over time as new indicators become available from data sources or if certain factors become more, or less, predictive of economic growth.
This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon as research or investment advice regarding any strategy or security in particular.
This material is prepared for use by institutional investors and investment professionals and is provided for limited purposes. This material is a general communication being provided for informational and educational purposes only. It is not designed to be investment advice or a recommendation of any specific investment product, strategy, or decision, and is not intended to suggest taking or refraining from any course of action. The opinions expressed in this material represent the current, good-faith views of the author(s) at the time of publication. The views are provided for informational purposes only and are subject to change. This material does not take into account any investor's particular investment objectives, strategies, tax status, or investment horizon. Investors should consult a financial advisor for advice suited to their individual financial needs. Putnam Investments cannot guarantee the accuracy or completeness of any statements or data contained in the material. Predictions, opinions, and other information contained in this material are subject to change. Any forward-looking statements speak only as of the date they are made, and Putnam assumes no duty to update them. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those anticipated. Past performance is not a guarantee of future results. As with any investment, there is a potential for profit as well as the possibility of loss.
This material or any portion hereof may not be reprinted, sold, or redistributed in whole or in part without the express written consent of Putnam Investments. The information provided relates to Putnam Investments and its affiliates, which include The Putnam Advisory Company, LLC and Putnam Investments Limited®.