What's Top of Mind in Macro Research: Key takeaways from our 2026 outlooks See all our year-ahead forecasts in one place. Visit the page. 18 December 2025 | 4:23PM EST Economics Research Transcript Despite concerns about higher US tariffs, global growth held up well this year, and we expect another sturdy year for the global economy in 2026. Specifically, we forecast 2.8% global growth next year (on an annual average basis), with the US, Europe, and China likely to outperform consensus expectations, though ...

Global Economic Outlook - The global economic growth outlook is bleak, with the IMF projecting a slowdown in 2026 due to rising protectionism and prolonged uncertainty [1][10][27] - Global economic activity is expanding modestly, primarily driven by the services sector, but tariff pressures are constraining trade and manufacturing [12][34] China - China's economic growth is losing momentum, with manufacturing contracting for seven consecutive months, the longest period in over nine years [42][44] - Retail sales growth is significantly below pre-pandemic levels, and GDP growth is expected to slow from 4.8% in 2025 to 4.4% in 2026 without substantial stimulus measures [1][42] - The real estate slump and oversupply issues continue to pose challenges, with recovery efforts expected to take time [44][51] United States - The U.S. economy is projected to grow moderately at 2.1% in 2026, slightly up from 2.0% in 2025, supported by fiscal expansion and service sector activity [2][21] - Labor market slowdown and various risks, including political uncertainty and tariff impacts, are expected to cloud the economic outlook [21][27] - The Federal Reserve is anticipated to lower the federal funds rate to a range of 3.25%-3.50% amid sticky inflation and economic headwinds [21][27] Eurozone - The Eurozone is expected to continue its recovery with modest GDP growth of 1.1% in 2026, supported by fiscal policies and an expanding service sector [28][30] - However, persistent weaknesses in manufacturing and external demand due to geopolitical tensions may weigh on overall growth [28][34] Japan - Japan's economy shows potential for recovery, bolstered by fiscal stimulus and strong service sector activity, despite challenges from weak manufacturing and global demand [3][35] - The government has introduced a JPY 21.3 trillion stimulus package to address inflation and promote growth [3][37] - The Bank of Japan is expected to cautiously normalize its monetary policy as inflation remains above the target [38][41] Thailand - Thailand's economic growth is projected to slow to 1.8% in 2026, the lowest in five years, due to the impact of U.S. tariffs and global trade tensions [3][52] - The tourism sector is recovering but has not yet returned to pre-pandemic levels, and domestic political uncertainties may affect public spending [3][52] - Stimulus measures and growth in emerging industries may provide some support to the economy [3][52]

Global Economic Growth Projections - Scope Ratings has slightly revised its global growth estimate for 2025 to 3.3% for this year and 3.2% for next year [1] - The Euro area is expected to grow at 1.4% next year, following a 1.5% growth this year, with Germany, France, and Italy projected to grow at 1.0%, 1.0%, and 0.7% respectively [1][2] - The UK economy is forecasted to grow at a moderate rate of 1.0% next year [2] Regional Growth Highlights - Strong recovery in the periphery of Europe is expected, with Ireland at 3.0%, Spain at 2.5%, Portugal at 2.1%, and Greece at 2.0% growth next year [2] - Central and Eastern Europe, particularly Bulgaria, is projected to grow by 3.2% in 2026 after euro accession [2] US and China Growth Outlook - The US growth estimate has been revised to around 2% for this year, with an above-potential growth of 2.4% next year [3] - China is projected to achieve a growth of 4.7% next year after meeting its 5% growth target for this year, aided by easing US-China trade tensions [3] Macro Risk Factors - The balance of medium-run risks for the global economic and credit outlook remains tilted to the downside, influenced by US policy shifts, geopolitical tensions, and financial system risks [5][6] - Key risks include elevated valuations across asset classes, protectionist trade policies, intensifying public debt challenges, and heightened geopolitical uncertainties [7]

Summary of J.P. Morgan's Global Economic Outlook 2026: A Conscious Recoupling Industry Overview - The report focuses on the global economic outlook, particularly the impact of trade wars, labor markets, and fiscal policies on GDP growth and inflation trends. Key Points and Arguments Global Economic Growth - Global GDP growth is projected to be resilient, with an estimated increase of 2.3% in 2025, driven by strong capital expenditure (capex) in technology sectors despite a backdrop of trade war concerns [5][7][10] - A modest growth boost is expected from technology investments, particularly in AI, although productivity gains from these investments may take time to materialize [5][14][25] Labor Market Dynamics - Weak labor demand is eroding purchasing power, especially in the U.S., where private sector labor income growth is slowing amid rising inflation [5][19] - There is a projected 35% risk of the U.S. sliding into recession next year due to elevated downside risks interacting with depressed business sentiment [5][30] - The juxtaposition of strong business spending and weak hiring is unprecedented, indicating a potential shift in labor market dynamics [11][14] Inflation Trends - Global core inflation has remained sticky at around 3% for two years, influenced by tight labor markets and elevated wage inflation [5][24] - The expected rebound in labor demand amidst weak supply is likely to sustain inflationary pressures, with U.S. core inflation forecasted to remain above 3% in the first half of 2026 [5][58] Fiscal Policy and Economic Support - Front-loaded fiscal stimulus, particularly in the U.S. and China, is expected to boost global GDP growth in the first half of 2026 [5][21] - The fiscal easing implemented this year is projected to support growth but may lead to entrenched structural deficits, particularly in the U.S. [21][24] Trade War Impacts - The trade war has created imbalances, with tariff avoidance and new technologies contributing to capex strength, but business caution remains a significant drag on hiring [5][43] - The report notes a less disruptive trade war than initially anticipated, with tariff rates settling at levels significantly higher than earlier forecasts [46][54] Consumer Behavior and Spending - Consumer spending is expected to slow, particularly in the U.S., with a projected growth rate of around 1% in the fourth quarter of 2025 [20][19] - Households are in a strong position to smooth spending despite downward pressure on real labor income, but rising job security concerns could disrupt this [19][30] Future Scenarios - The report outlines various scenarios for the future, maintaining a 35% probability of recession, particularly in the U.S., while also highlighting the risks of sticky inflation and potential political influences on monetary policy [30][32] - The outlook suggests that the global economy has reached a critical juncture, with the potential for labor demand to recouple with GDP gains if supportive conditions persist [15][25] Other Important Insights - The report emphasizes the importance of business sentiment in navigating policy shocks and the unusual decoupling of capex growth from labor market performance [10][69] - It highlights the need for careful monitoring of consumer behavior and business sentiment as indicators of future economic resilience [19][30] This comprehensive analysis provides a detailed view of the current economic landscape and potential future developments, emphasizing the interconnectedness of global markets, labor dynamics, and fiscal policies.

Summary of Key Points from the Conference Call Industry Overview - The conference call discusses the **2026 Global Economics Outlook**, focusing on the potential growth and inflation scenarios for the global economy in 2026 and beyond, with a particular emphasis on the **US economy** and its influence on global growth dynamics [1][5][11]. Core Insights and Arguments - **Global Growth and Inflation Scenarios**: The outlook presents a wide range of potential outcomes for global growth and inflation in 2026, with a base case predicting continued disinflation and growth stabilizing near potential by 2027 [1][8]. - **US Economic Resilience**: The US economy is highlighted as a key driver of global growth, supported by resilient consumption and AI-driven capital expenditures. The forecast suggests that the US will likely lead to material upside in global growth, while any significant slowdown would likely stem from miscalculations regarding US growth [5][8][11]. - **Volatility in US GDP**: The US GDP experienced negative growth in Q1 2025, followed by a strong recovery in Q2, attributed to fluctuations in trade, inventories, and supply chains. This volatility is expected to persist due to factors like government shutdowns [6][11]. - **Federal Reserve's Dilemma**: The Fed faces challenges in decision-making due to conflicting signals from a slowing labor market and solid consumer spending. The baseline forecast anticipates the Fed will cut rates in response to rising unemployment, but the economy is expected to recover in the latter half of 2026 [7][9][25]. - **Global Disinflation Trends**: Disinflation is expected to continue globally, with the US experiencing initial inflationary pressures from tariffs and immigration restrictions before a gradual decline towards target levels. The euro area is projected to undershoot the ECB's inflation target due to a persistent output gap [8][22][23]. Important but Overlooked Content - **Monetary Policy Adjustments**: The Fed is expected to ease monetary policy in April 2026, with an extended pause at 3.00-3.25%. The ECB is anticipated to revise its inflation forecasts downward and ease rates twice in 2026, while the BoE is projected to lower rates to 2.75% before a potential increase in 2027 [25][31]. - **Regional Growth Projections**: The euro area is expected to see moderate growth, with China projected to grow at 5.0% in 2026, gradually moving towards a more stable inflation environment. Japan is forecasted to experience a nominal growth recovery, while India shows continued economic strength [14][22][25][31]. - **AI's Role in Productivity**: The adoption of AI is expected to significantly enhance productivity, contributing to potential GDP growth and supporting investment spending, despite a slight decline in the growth rate of AI-driven capital expenditures [11][60][64]. Conclusion - The conference call outlines a complex and uncertain economic landscape for 2026, with the US economy playing a pivotal role in shaping global growth and inflation trends. The interplay between consumer spending, AI-driven investments, and monetary policy adjustments will be crucial in determining the trajectory of economic recovery and stability in the coming years [1][5][8][11].

Core Insights - The article provides a market analysis focusing on the Australian Dollar, New Zealand Dollar, and the US Dollar Index Futures, indicating trends and potential investment opportunities in these currencies [1] Group 1: Australian Dollar Analysis - The Australian Dollar's performance against the US Dollar is analyzed, highlighting its fluctuations and potential impacts on trade and investment [1] - Key economic indicators influencing the Australian Dollar are discussed, including commodity prices and interest rate changes [1] Group 2: New Zealand Dollar Analysis - The New Zealand Dollar's exchange rate with the US Dollar is examined, with emphasis on its correlation with agricultural exports and global market trends [1] - Insights into the Reserve Bank of New Zealand's monetary policy and its effects on the currency's strength are provided [1] Group 3: US Dollar Index Futures - The US Dollar Index Futures are analyzed, showcasing their role as a benchmark for the dollar's performance against a basket of currencies [1] - Market sentiment and economic data releases that could influence the US Dollar Index are highlighted, indicating potential volatility [1]

Macroeconomic & Trade Dynamics - China's Jan-June trade surplus reached CNY 4210 billion [1] - China's trade resisted pressure in the first half of the year [1] - Discussions are ongoing regarding trade tensions with the EU [1] - Potential meeting between Xi Jinping and Trump is anticipated [1] - Price wars in China are considered more dangerous than tariffs [1] Geopolitical Relations - Australia is pursuing 'practical cooperation' with China [1] - The relationship with China is considered 'very important' [1] - Focus on China-Australia ties [1] Economic Outlook - Examination of the global economic outlook [1] - Monitoring of US CPI data [1] Social Trends - 'Anti-Involution' is identified as a new buzzword in China [1]

Investment Rating - The report indicates a baseline forecast of global growth slowing from 3.5% in 2024 to 2.5% in 2025, with specific growth rates for major economies outlined [7][8][70]. Core Insights - The broad imposition of tariffs by the US is identified as a structural shock to global trade, significantly impacting growth across various economies [5][6]. - The report highlights that the trade shock affects economies simultaneously, pushing them below potential growth levels, with the US experiencing a notable decline in real GDP growth from 2.5% in 2024 to 1.0% in both 2025 and 2026 [7][74]. - China is projected to see a slowdown in real growth by approximately 0.5 percentage points in 2025 compared to 2024, with persistent deflation expected [7][17]. - India is noted as the fastest-growing economy in the coverage, with real GDP growth forecasted at 5.9% in 2025 and 6.4% in 2026 [7][68]. Summary by Sections Growth – A Widespread Deceleration - Global growth is forecasted to decelerate significantly, with the US, Euro area, and China all experiencing reduced growth rates due to trade shocks and other economic factors [7][70]. - The report anticipates that the US will face a step down in real GDP growth, while the Euro area will not exceed 1% growth throughout the forecast period [7][8]. Inflation Divergence - The report discusses a divergence in inflation trends, with the US experiencing a temporary boost in inflation due to tariffs, while other regions like the Euro area and Japan see inflation moderating [16][17]. - Core PCE inflation in the US is expected to peak at 4.5% before declining, remaining above the Federal Reserve's target throughout 2026 [16][17]. Monetary Policy – The Fed in a Bind - Central banks are expected to react to slower growth and softer inflation, with the Federal Reserve likely to maintain its policy stance until inflation peaks [18][19]. - The report forecasts that the Fed will restart its easing cycle in March 2026, while the ECB is expected to continue its easing cycle, bringing the policy rate below neutral [18][19]. Global Trade – A New Paradigm - The report emphasizes that the trade shock is a significant factor affecting global economic performance, with uncertainty in trade policy leading to reduced capital expenditure decisions globally [6][74]. - The impact of tariffs is expected to create a level shift in prices, affecting consumption patterns and overall economic growth [61][62].