The global economy has hit a soft patch with the euro-zone virtually stagnant, the US labour market flagging and China rationing its policy stimulus. We expect this weakness to persist around the turn of the year given the pessimistic message from various business surveys and the fact that most economies are still feeling the effects of previous interest rate hikes. Even if the stimulus that China is now implementing props up its economy in the near term, this will not resolve its underlying problems. However, the risk of a global hard landing still seems relatively low. Fiscal policy remains supportive in general and the ongoing decline in inflation will boost real incomes even as employment slows. Easing price pressures will allow most central banks to normalise interest rates in the months ahead, which should allow growth to regain some pace in 2025.
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