June Global Macro Monthly - A skip and a hop(e)
- Key event risk has faded: bank turmoil has stabilized and the US debt ceiling was resolved with little disruption.
- Focus returns to cyclical dynamics. Economic signals have been mixed. Eurozone history has been revised to a mild recession over the winter, but broadly, activity has been more resilient than we had expected.
- The outlook remains weaker: we expect mild recession in the US, and risks of downturn in the UK and even the Eurozone, although we expect firming activity in China.
- Headline inflation has fallen in most jurisdictions, but core inflation remains stickier, not least with labor markets continuing to suggest second round effects.
- Central banks are being forced into delivering more restrictive policy, even if data-dependency risks being myopic and risks sharper downturns ahead.
- Sovereign debt concerns also rise in advanced economies.