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Global economy: US Resilience, UK's Inflation Dip, and OECD's New Forecasts

Text caption of "Weekly Brief" with a bear and bull and logo of Wealthor

What Happened Last Week?

  • US:

    • The clock was ticking on student loan relief, with repayments set to resume soon.

    • The Federal Reserve (the Fed) maintained interest rates but hinted at a potential increase later this year.

  • Europe:

    • UK's inflation rate took an unexpected dip in August, marking its lowest in 18 months.

    • The Bank of England (BoE) paused its interest rate hikes after 14 consecutive increases.

  • Asia:

    • The OECD adjusted its 2024 global growth forecast, primarily due to China's performance.

Deep Dive:

  • Student Debt: Over the past two decades, student debt in the US has surged, now standing at a staggering $1.8 trillion. With relief measures ending, Americans will soon face monthly repayments, impacting discretionary spending, especially with the recent 30% rise in oil prices.

  • Federal Reserve's Stance: The Fed's "dot plot" projections indicate that a majority of officials are leaning towards one more rate hike in 2023. They also foresee a gradual reduction in rates over the next few years.

  • UK Inflation: The UK witnessed a drop in its inflation rate in August, with consumer prices rising by 6.7% year-on-year. The core inflation rate, which excludes volatile items, also decreased.

  • Bank of England's Decision: The BoE's decision to maintain its key rate was not unanimous. While the majority voted to keep rates steady, some officials pushed for an increase.

  • OECD's Global Outlook: The OECD has a positive outlook for 2023 but has reduced its growth forecast for 2024 primarily influenced by China's economic performance. Excluding the pandemic-hit 2020, the predicted growth would be the slowest since the global financial crisis.

This Week's Focus: The US Economy's Path

The Fed's new economic projections suggest a brighter future for the US economy. They anticipate:

  • A reduction in core inflation for 2023 to 3.7%.

  • A growth estimate for this year at 2.1%.

  • A projection of 1.5% growth for 2024.

These numbers align with the OECD's estimates, which also revised its US economic growth forecasts for this year and the next. The possibility of a US "soft landing" is becoming more plausible, a scenario where the economy slows just enough to manage inflation without triggering a recession. This potential outcome is promising for investors.

The Week Ahead:

  • Monday: German Ifo business climate survey.

  • Tuesday: US consumer confidence and new home sales. Earnings report from Costco.

  • Wednesday: US durable goods orders. Earnings report from Micron Technology.

  • Thursday: Eurozone economic sentiment. Earnings report from Accenture.

  • Friday: Japanese unemployment and retail sales, and eurozone inflation.

Pathway & Guidance:

While it's essential to stay updated with global economic trends, here's how you can navigate these insights:

  • Stay Informed: With student loan relief coming to an end, it's crucial for those affected to be aware of their financial obligations and plan accordingly.

  • Monitor Interest Rates: The hints from the Federal Reserve about potential rate hikes can influence investment decisions. It's essential to keep an eye on these developments.

  • Global Perspective: The OECD's forecasts, especially concerning global growth, can provide insights into global economic trends. Diversifying investments and understanding global markets can be beneficial.

Note: This is not financial advice but merely a pathway based on the news. Always consult with a financial advisor before making any decisions.



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