20 September 2023
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OECD revise global growth down in 2024

By Daniel Richards

The outlook for 2023 global GDP growth was revised upwards in the September OECD interim economic outlook, published yesterday. The OECD now expect global growth to reach 3% y/y in 2023, up from a forecast of 2.7% in June, with the upwards revision being attributed to lower energy prices and the reopening of China. In contrast, expectations of growth in 2024 for the world economy have been revised down, given receding Chinese economic activity and the impact of higher interest rates. Global growth in 2024 is forecast to reach 2.7%, down from 2.9% in the June forecast.  Although inflation is expected to moderate over the remainder of 2023 and into 2024, the OECD expect it to remain above target in most countries.      

The final release of the August Eurozone CPI revised headline inflation down to 5.2% y/y from an initial reading of 5.3%. Core inflation was however left unchanged at 5.3% y/y. Comments made on Tuesday by ECB Governing council member, Francois Villeroy, highlight his preference for a pause in hikes, saying that the current level of rates was a “plateau”.

US housing starts declined 11.3% m/m in August, well below consensus expectations for a 0.9% fall. The decline took housing starts to its lowest level since June 2020, highlighting declining affordability in the US housing market.

Today’s Economic Data and Events

  • 10:00 UK CPI Aug: Forecast 7% y/y
  • 22:00 FOMC rate decision (upper bound): Forecast 5.5%

Fixed Income

  • US Treasury yields moved higher on Tuesday, ahead of the Fed’s policy decision today. With markets anticipating the Fed will signal that rates might need to stay high for longer, the 2yr yield rose 4bps to reach 5.090% and the 10yr UST yield rose 6bps to 4.359%.
  • In European markets, both the 2yr and 10yr Bund yield was up 3bps to 3.276% and 2.733%, respectively. In contrast, the 2yr Gilt yields fell 3bps to 4.982% and the 10yr Gilt yield declined 5bps to reach 4.338%.

FX

  • EURUSD declined 0.12% to reach 1.0679, while GBPUSD rose gained 0.07% to 1.2392.
  • Commodity currencies were in general stronger against the dollar on Tuesday. USDCAD fell 0.28% to 1.3448, while AUDUSD and NZDUSD rose 0.26% and 0.32%, respectively, to reach 0.6454 and 0.5936.

Equities

  • There was some modest selling in equity markets yesterday ahead of the Fed decision later, but where there were losses, they were largely modest. In the US, the S&P 500 and the NASDAQ both closed 0.2% lower while the Dow Jones dropped 0.3%.
  • Moves were mixed in Europe where the CAC and the FTSE 100 both closed up a modest 0.1% but the DAX ended the day 0.4% lower.
  • Locally, the ADX added 0.1% and the DFM 0.7%. Saudi Arabia’s Tadawul ended the day up 0.3%.

Commodities

  • The remarkable recent rally in oil prices took a pause ahead of the Fed decision, with Brent crude closing down yesterday after three straight days of gains. It dropped 0.1% to USD 94/3/b while WTI ended the day down 0.3% at USD 91.2/b. Both benchmarks are losing further ground so far this morning.

Written By

Daniel Richards Senior Economist

Jeanne Walters Senior Economist


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