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Surprises bolster case for soft landing

Data releases were stronger than expected and enhanced the economic soft-landing theme. In G10 countries, growth improved but remained negative. In Asia, Central and Eastern Europe, the Middle East, and Africa, growth was already positive and rose a bit in January.

U.S. total nonfarm employment rose by 517,000 for the month, a significant surprise to the upside. Strong job gains occurred in many sectors such as leisure, hospitality, and health care. U.S. PMIs (purchasing manager indexes) had been indicating weakness in the fourth quarter but improved in January, while still staying in contraction territory. U.S. inflation dropped and was in line with expectations.

Europe also improved but did not return to growth. In one positive sign, the European PMI composite moved back into expansion territory. Both manufacturing and services activity improved, with a larger move in services. Business expectations, new orders, employment, and output prices rose at an accelerated pace for manufacturers and service providers.

LONG-TERM CYCLE

This six-year illustration shows stable GDP up until the collapse from the coronavirus pandemic.

Source: Putnam. Data as of January 31, 2023. 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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