As the world slows, Europe contracts
SHORT-TERM TRENDThe gradual slowdown in global growth continued in October.
Growth for G10 countries trended down due to slowing in Europe. Growth across Central and Eastern Europe, the Middle East, and Africa fell to contraction levels. Activity in Latin America and most of Asia also decelerated but remained in positive territory.
In the U.S., the Federal Reserve raised the policy rate by another 0.75% at the beginning of November and signaled the terminal rate would be higher. U.S. growth has been holding up better than expected and remains slightly positive. U.S. job gains were strong as total nonfarm payrolls increased by 261,000, while positive revisions lifted totals from prior months. Wages rose with average hourly earnings increasing by 0.4% month over month, leaving no sign of a noticeable slowdown in wage inflation. However, both the ISM manufacturing and services headline numbers declined to the lowest levels since May 2020.
Europe is contracting and euro area inflation remains in double digits, as core goods and services inflation increased. The S&P Global Eurozone Composite PMI dropped to 47.1 in October, with both manufacturing and services down.
China's growth is flat. In the third quarter, GDP growth was above expectations, driven by a rebound in manufacturing and services, but other data were mixed. Industrial production picked up and infrastructure investment growth stayed strong. However, retail sales remained very weak, and property investment and sales deteriorated.
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 October 31, 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.
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