Customer Logins

Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.

Customer Logins

My Logins

All Customer Logins
S&P Global Market Intelligence

  • S&P Global
  • S&P Dow Jones Indices
  • S&P Global Engineering Solutions
  • S&P Global Market Intelligence
  • S&P Global Mobility
  • S&P Global Commodity Insights
  • S&P Global Ratings
  • S&P Global Sustainable1
Close
Discover more about S&P Global’s offerings
Investor Relations
  • Investor Relations Overview
  • Investor Presentations
  • Investor Fact Book
  • News Releases
  • Quarterly Earnings
  • SEC Filings & Reports
  • Executive Committee
  • Corporate Governance
  • Merger Information
  • Stock & Dividends
  • Shareholder Services
  • Contact Investor Relations
Languages
  • English
  • 中文
  • 日本語
  • 한국어
  • Português
  • Español
  • ไทย
About
  • About Us
  • Contact Us
  • Email Subscription Center
  • Media Center
  • Glossary
Product Login
S&P Global Market Intelligence
  • Who We Serve
  • Solutions
  • News & Insights
  • Events
  • Product Login
  • Request Follow Up
  •  
    • Academia
    • Commercial Banking
    • Corporations
     
    • Government & Regulatory Agencies
    • Insurance
    • Investment & Global Banking
     
    • Investment Management
    • Private Equity
    • Professional Services
  • WORKFLOW SOLUTIONS
    • Capital Formation
    • Credit and Risk Solutions
    • Data & Distribution
    • Economics & Country Risk
    • Sustainability
    • Financial Technology Solutions
     
    • Issuer & IR Solutions
    • Leveraged Loans
    • Post Trade Processing
    • Private Markets
    • Risk, Compliance, & Reporting
    • Supply Chain
    PRODUCTS
    • S&P Capital IQ Pro
    • S&P Global Marketplace
    • China Credit Analytics
    • Climate Credit Analytics
    • Credit Analytics
    • RatingsDirect ®
    • RatingsXpress ®
    • 451 Research
    See More S&P Global Solutions
     
    • Capital Access
    • Corporate Actions
    • KY3P ®
    • EDM
    • PMI™
    • BD Corporate
    • Bond Pricing
  • CONTENT
    • Latest Headlines
    • Blog
    • Research
    • Videos
    • Podcasts
    • Infographics
    • Newsletters
    • Client Case Studies
    SECTOR-SPECIFIC INSIGHTS
    • Differentiated Data
    • Banking & Insurance
    • Energy
    • Maritime, Trade, & Supply Chain
    • Metals & Mining
    • Technology, Media, & Telecoms
    • Investment Research
    • Sector Coverage
    • Expert Directory
    More ways we can help
    NEWS & RESEARCH TOPICS
    • 2023 Big Picture Outlook
    • Credit & Risk
    • Cryptocurrency
    • Economics & Country Risk
    • Financial Services
    • Maritime & Trade
    • M&A
    • Sustainability & Climate
    • Technology
    See More
    • All Events
    • Webinars
    • Webinar Replays
    Featured Events
    WebinarM&A In Focus: Tech Acquisitions and the ‘New Normal’ in 2023
    • 02/08/2023
    • Live, Online
    • 11:00 am - 12:00 pm EST
    Webinar ReplaysAssessing the impact of the U.S. Government Accountability Office recommendations’ on Export Control Compliance at universities
    • 01/18/2023
    • On-Demand
    • 60 minutes
    ConferenceTPMTech
    • 02/23/2023
    • Hilton Long Beach Convention Center
  • PLATFORMS
    • S&P Capital IQ Pro
    • S&P Capital IQ
    • S&P Global China Credit Analytics
    OTHER PRODUCTS
    • Credit Analytics
    • Panjiva
    • Money Market Directories
     
    • Research Online
    • 451 Research
    See All Product Logins

Cresting global inflation gives world economy a soft landing

24 August 2022 Sara Johnson

After a brief setback in the second quarter of 2022, the world economy is expanding again.

Two shocks pushed the economy off course in the second quarter—Russia's invasion of Ukraine on 24 February and COVID-19 lockdowns in mainland China. After growing at annual rates of 6.2% quarter on quarter (q/q) in the fourth quarter of 2021 and 2.6% in the first quarter of 2022, world real GDP fell at a 1.8% rate in the second quarter. Recent data suggest the global economy is back on track, led by resilient emerging markets.

Global GDP data for August Q3 2022

In late 2022 and 2023, the most likely scenario is one of subdued global growth.

High global inflation continues to squeeze household budgets and undermine consumer confidence. Meanwhile, the post-pandemic resurgence in tourism and consumer services is beginning to fade. The lagged impacts of monetary policy tightening and rising interest rates will be felt throughout the year ahead, restraining investment and consumer durables spending. World real GDP growth is thus projected to slow from 5.8% in 2021 to 2.7% in 2022 and 2.3% in 2023. Once inflation subsides and financial conditions improve, global growth is expected to revive to 3.0% in 2024.

A moderation in price and wage inflation is key to the economic forecast of a soft landing.

In the current economic situation, a global "soft landing" might be characterized by cooling demand, resolution of supply-chain disruptions, diminishing input and output price inflation, balanced labor markets, and smoothly functioning financial markets. On the inflation front, recent declines in industrial and agricultural commodity prices are helpful. As of mid-August, the IHS Markit Materials Price Index has fallen 20% from its early March peak. Crude oil prices have dropped below USD100/barrel largely owing to weak demand from mainland China. The retreat in commodity prices is filtering downstream to intermediate and finished products and should bring some relief to consumers in most parts of the world. After picking up from 3.9% in 2021 to 7.6% in 2022, global consumer price inflation is projected to ease to 4.5% in 2023 and 2.6% in 2024. New supply shocks could darken the near-term world economic outlook, however, since inventories are low in energy and metals markets.

In turn, monetary policy tightening will play an essential role in subduing global inflation.

An open question is whether central banks can achieve a soft landing and reach their inflation targets without pushing interest rates above prevailing inflation rates. Supply conditions related to the COVID-19 pandemic and the energy transition have driven a large part of the global inflation surge during the past two years. Our view is that tightening financial conditions are necessary to cool excess demand and help bring down inflation. The degree of tightening will depend on local conditions. In the United States (US), the federal funds rate is expected to rise to a range of 3.50-3.75% in December 2022 and stay there for a full year. With the eurozone tipping into recession later in 2022, the European Central Bank moves more cautiously, raising its refinance rate to its long-run neutral rate of 2.00% in January 2023. Investors' flight to safety poses risks for emerging markets that depend on capital inflows to finance trade and fiscal deficits.

Energy supply problems and high inflation will push Western Europe into recession.

The United Kingdom (UK) slipped into recession in the second quarter as high inflation eroded household incomes and consumer sentiment plunged to a record low. With consumer price inflation at 10.1% year on year (y/y) in July and headed higher (with a 75% October increase in gas and electricity rate caps), the UK recession is expected to linger through the spring quarter of 2023.

Eurozone real GDP growth was higher than expected (0.7% q/q) in the second quarter thanks to inventory accumulation and pent-up demand for services. Growth prospects are rapidly deteriorating, however, in response to continuing energy supply shortages, accelerating prices, the ongoing Russia-Ukraine war, and tightening financial conditions. With the eurozone likely to experience a mild recession in late 2022 and early 2023, real GDP growth is projected to slow from 5.2% in 2021 to 2.9% in 2022 and 0.8% in 2023. Manufacturing centers in northern Europe, including Germany, are most exposed to cuts in Russian energy supplies.

The US economy is a paradox of stagnant real GDP and surging employment.

Although real GDP decreased slightly in the first two quarters of 2022, do not call it a recession! Since December 2021, the monthly indicators used by the National Bureau of Economic Research in dating business cycles have posted solid gains, including employment, industrial production, real personal income excluding transfer payments, and real retail sales. Meanwhile, a sharp slowdown in inventory accumulation has pulled down real GDP. Our economic forecast calls for a period of sluggish economic growth through the end of 2023, as moderate gains in consumer spending and government purchases are offset by significant declines in residential and commercial construction. Real GDP growth is projected to slow from 5.7% in 2021 to 1.5% in 2022 and 1.0% in 2023 before picking up to 1.7% in 2024. With growth falling short of potential, the US unemployment rate will likely rise from 3.5% in July to 4.8% in mid-2024.

Mainland China's economy continues to struggle.

After declining 2.6% q/q in the second quarter, real GDP is expected to recover in the third quarter, although July data indicate subpar growth in services and manufacturing. The government's dynamic zero-COVID policy will remain in place through at least March 2023, preventing a return to normalcy and limiting the effectiveness of the government's new stimulus programs. The housing market remains in a deep recession, and declining land sales are hurting local government finances. Real GDP growth is projected to slow from 8.1% in 2021 to 3.8% in 2022 before picking up to 4.9% in 2023.

Asia Pacific's emerging markets will support global growth as other regions falter.

After slowing from 6.2% in 2021 to 3.8% in 2022, Asia Pacific's real GDP growth is projected to pick up to 4.2% in 2022 and 4.5% in 2023. India, Indonesia, Vietnam, the Philippines, Bangladesh, and Cambodia will likely achieve growth rates of 5-7%. This performance reflects strong intraregional growth dynamics related to regional free-trade agreements, efficient supply chains, competitive costs, and steady inflows of foreign direct investment.

Bottom line

With global demand cooling and supply disruptions easing, global inflation is expected to moderate in 2023 and 2024. The global economy is expected to achieve a soft landing, with real GDP averaging 2.5% in 2022 and 2023. This will be a multi-speed economy, however, with Western Europe likely to experience a mild recession in late 2022 and early 2023. Other major countries will avert recessions but perform below potential.

Support your business plans with unparalleled risk analysis and the economic forecast for over 200 countries offered by our Advanced Country Analysis and Forecast (AdCAF).

Posted 24 August 2022 by Sara Johnson, Executive Director – Economic Research, S&P Global Market Intelligence


This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

Previous Economics & Country Risk Post All Economics & Country Risk Next Economics & Country Risk Post

Related Posts

  • Where to find the fastest adoption rates for blockchain technology
  • Rising cost of living is likely to fuel protests in Europe in 2023
  • Weekly Pricing Pulse: Falling energy prices mark the start of a New Lunar Year for commodity markets
  • US Weekly Economic Commentary: Don’t be fooled by Q4 GDP
  • Bank of Canada pauses monetary policy
  • Weekly Pricing Pulse: Commodity prices rise on chemical market strength
  • The global economic outlook brightens as inflation eases
  • US Weekly Economic Commentary: Shrinking goods sector

Explore

RELATED INDUSTRIES & TOPICS
  • Economics & Country Risk
  • Economic Data
  • Economic forecasts and analysis
  • Inflation

Recommended for you

  • Global Economy
  • Country Risk
  • Pricing & Purchasing

A World Rebalancing

Five themes driving the economics and risk outlook in 2023
Request full report

From neighborhood to nation we have you covered

Regional Explorer: Economics, risk, and data analytics
Learn more
Get a 360 degree perspective

Subscribe to our blog newsletter

Sign up
Subscribe to RSS Feed

Follow Us

Feb 03
EconomicsRisk@EconomicsRisk

And here's another citation for our economists on US employment trends, this one in @USATODAY: https://t.co/NO3pIP3xRz

Feb 03
Feb 03
EconomicsRisk@EconomicsRisk

Wonderful to see @ChrisVarvares quoted in the @washingtonpost on the US #employment report! https://t.co/WFAjGKrSPx https://t.co/crhSqBuVtJ

Feb 03
Feb 03
EconomicsRisk@EconomicsRisk

Mark your calendars! https://t.co/2wiIxaWPHS

Feb 03
Feb 03
EconomicsRisk@EconomicsRisk

Where does one find the fastest adoption rates for #blockchain technology? The answer may surprise you: https://t.co/ZAifbJHgHm

Feb 03
{"items" : [ {"name":"share","enabled":true,"desc":"<strong>Share</strong>","mobdesc":"Share","options":[ {"name":"facebook","url":"https://www.facebook.com/sharer.php?u=http%3a%2f%2fwww.spglobal.com%2fmarketintelligence%2fen%2fmi%2fresearch-analysis%2fwith-inflation-cresting-global-economy-achieve-soft-landing.html","enabled":true},{"name":"twitter","url":"https://twitter.com/intent/tweet?url=http%3a%2f%2fwww.spglobal.com%2fmarketintelligence%2fen%2fmi%2fresearch-analysis%2fwith-inflation-cresting-global-economy-achieve-soft-landing.html&text=Cresting+global+inflation+gives+world+economy+a+soft+landing+%7c+S%26P+Global+","enabled":true},{"name":"linkedin","url":"https://www.linkedin.com/sharing/share-offsite/?url=http%3a%2f%2fwww.spglobal.com%2fmarketintelligence%2fen%2fmi%2fresearch-analysis%2fwith-inflation-cresting-global-economy-achieve-soft-landing.html","enabled":true},{"name":"email","url":"?subject=Cresting global inflation gives world economy a soft landing | S&P Global &body=http%3a%2f%2fwww.spglobal.com%2fmarketintelligence%2fen%2fmi%2fresearch-analysis%2fwith-inflation-cresting-global-economy-achieve-soft-landing.html","enabled":true},{"name":"whatsapp","url":"https://api.whatsapp.com/send?text=Cresting+global+inflation+gives+world+economy+a+soft+landing+%7c+S%26P+Global+ http%3a%2f%2fwww.spglobal.com%2fmarketintelligence%2fen%2fmi%2fresearch-analysis%2fwith-inflation-cresting-global-economy-achieve-soft-landing.html","enabled":true}]}, {"name":"rtt","enabled":true,"mobdesc":"Top"} ]}
Filter Sort
  • About Us
  • Quality Program
  • Contact Us
  • Email Subscription Center
  • Press Releases
  • Careers
  • Corporate Responsibility
  • Our History
  • Investor Relations
  • Leadership
  • © 2023 S&P Global
  • Terms of Use
  • Cookie Notice
  • Privacy Policy
  • Disclosures
  • Do Not Sell My Personal Information