Global Economics Wrap-Up_ September 27, 2024

Summary of Key Points from Goldman Sachs Global Economics Wrap-Up Industry Overview - Central Banks: Several central banks, including the Bank of Canada (BoC), Reserve Bank of New Zealand (RBNZ), Riksbank, and the Federal Reserve (Fed), are pivoting towards sequential cuts in interest rates due to economic indicators [2][3][10]. Core Economic Insights - Inflation Trends: - Core inflation has significantly declined to 2.8% year-over-year in pivoting countries, with wage growth at 4.1% [2]. - The Euro Area is expected to reach average levels of core inflation and wage growth by Q4 2024, while the UK and Australia are projected to reach these levels in H1 2025 [2]. - Year-over-year core inflation forecasts for the end of 2024 are +3.2% in the UK, +2.7% in the Euro area, +2.6% in the US (PCE), and +2.3% in Canada [3]. - GDP Growth: - GDP growth is expected to remain firm in countries that have not shifted towards sequential cuts, but forecasts are somewhat bearish compared to central bank expectations [3]. - The Q3 GDP tracking estimate for the US has been boosted to 3.2%, with domestic final sales forecasted at 2.8% [6][7]. Regional Economic Developments - United States: - Core PCE inflation rose by 0.13% in August, with a year-over-year increase of 2.68% [6]. - Job growth is expected to stabilize the unemployment rate, with estimates of labor supply growth slowing to 150k-180k per month [7]. - Europe: - The European Central Bank (ECB) is expected to cut rates in October following weak inflation data from France and Spain, with French inflation at 1.5% and Spanish inflation at 1.7% year-over-year [8][10]. - The Euro area composite flash PMI decreased to 48.9, indicating broad-based weakness in the services sector [10]. - Asia: - The People's Bank of China (PBOC) has initiated easing measures, including a 20 basis point cut in the repo rate and a 50 basis point cut in the reserve requirement ratio, aimed at reviving domestic demand [13]. - Additional government bond issuance and further cuts in the reserve requirement ratio are expected in Q4 and 2025 [13]. Additional Insights - Market Sentiment: - The breadth of inflationary pressures has moderated, with a decrease in the share of the headline basket running above 4% in major developed markets, excluding Japan [3]. - The Riksbank and Swiss National Bank have also implemented rate cuts, indicating a broader trend of easing monetary policy across various regions [11][12]. - Investment Considerations: - Investors are advised to consider the report as one of several factors in their investment decisions, highlighting the importance of comprehensive analysis [4]. This summary encapsulates the key economic indicators and forecasts discussed in the Goldman Sachs Global Economics Wrap-Up, providing insights into the current state and future expectations of various economies.