The US economic momentum has eased, but the data is consistent with a soft-landing. The labour market is gradually cooling, though monthly nonfarm payroll continue to defy expectations. However, the broader employment data and survey evidence suggest the Federal Reserve (Fed) is on the right track. Analysts predict a further decline in job openings is more likely to translate into actual job cuts, pushing the unemployment rate higher. This should lead to lower wage growth and a further easing in price pressures.
Consumers, the mainstay of the economy, have almost exhausted the excess Covid-era savings and face a tougher environment ahead. Early 2025 could be a significant restraint as significant tax cuts are set to expire. However, the Inflation Reduction Act (IRA) and CHIPS Act continue to provide a boost to various sectors and should partially cushion the impact of slower consumer demand.
In Europe and the UK, the economic pendulum has shifted marginally towards a softer landing, but challenges remain. Although corporate confidence has edged higher in recent months, it likely reflects short-term factors rather than a distinct shift towards significantly higher activity. Key data around the labour market, capital spending, and tighter lending standards are consistent with growth remaining well below potential growth rates.
Meanwhile, Chinese and Japanese growth continues to disappoint to the downside. Most of the key growth drivers in China remain challenging, and the property market remains an ongoing source of concern.
As the global economy navigates these diverging paths, policymakers and businesses must remain vigilant and adapt to the evolving landscape.
To find more about the latest house views from London & Capital’s Investment Desk, read the full AndPapers Q3 2024 here.
