(Bloomberg) — As the global economy heads for a soft landing, there will be plenty of anxiety along the way, with Iran's missile attack on Israel putting an exclamation point on global jitters.
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As the world's financial elite gather in Washington for meetings of the International Monetary Fund, the World Bank and the Group of 20, they are confronted with a mix of slowing growth, stubborn inflation, high interest rates and debt levels, and geopolitical risks that are rattling the market in Kiev Tel Aviv.
Bloomberg Economics now expects global activity to slow to 2.9% this year – up 0.2 percentage points from December, calling it a “big escape” – but still “well below” the pace before the pandemic.
IMF chief Kristalina Georgieva has signaled that the fund will also slightly raise its forecast, to be published on Tuesday, from the current 3.1%, while warning that the world is heading for “a sluggish and disappointing decade”.
With this in mind, investors will be closely watching the key participants in the meetings. Scheduled speakers include Federal Reserve Chairman Jerome Powell, U.S. Treasury Secretary Janet Yellen, British Chancellor of the Exchequer Jeremy Hunt, and the heads of the European Central Bank, the Bank of Japan and the Bank of England.
Current politics have paralyzed the G-20 in recent meetings, and it will likely once again fail to address the risks that divide its members.
Russia's war in Ukraine is entering its third year, with U.S. military support being questioned and Kiev's ability to pay for ammunition and bond coupons coming into increasing focus. Meanwhile, the war between Israel and Hamas in Gaza risks plunging the Middle East into a major conflagration.
The story goes on
Iran fired more than 200 ballistic and cruise missiles and attack drones against Israel on Saturday, sparking a dramatic escalation in tensions.
Both conflicts over some of the world's biggest oil suppliers are driving up energy prices, a worrying sign for inflation fighters.
The IMF has sounded the alarm about the geopolitically driven fragmentation of the global economy. The divide is broadly between the United States and the European Union on one side and China and Russia on the other – with the Global South being the main battleground for business and influence.
“We have to prepare for more, because the world is more diverse,” Georgieva said when asked about geopolitical volatility. “And it's a world in which we've seen divergence, not just in economic conditions, but also divergence in goals.”
Another focus next week will be the deep debt crisis of several emerging markets, which has gobbled up cheap money, mostly from China, for nearly two decades. Now poor countries are struggling to regain access to capital while creditors fight for their share – a competition with profound implications for Beijing's influence over global finance.
What Bloomberg Economics says:
“Compared to the expectation that the price of containing runaway inflation would be a spate of recessions, a year of slightly weaker global growth seems like a big way out.
The next big question is: Given the surprisingly robust growth, will the central banks' decisions be delayed? We have postponed our call for an initial Fed move until July – still earlier than many in the market expect.”
—Tom Orlik, chief economist. For a full analysis click here
Otherwise, Chinese economic data, British inflation and wage figures and Canada's budget will be among the key highlights.
Click here to find out what happened last week. Below you will find an overview of developments in the global economy.
USA and Canada
The U.S. data calendar begins Monday with retail sales and economists forecast a moderate increase at the end of the first quarter, underscoring a resilient but cautious consumer. The figures do not take into account the impact of inflation and mainly reflect spending on goods.
March data on inflation-adjusted purchases, including spending on services, coming later in the month will provide a more comprehensive view of household demand.
Next week's housing data includes a government report on Tuesday showing that the start of housing construction settled down in March after a solid increase in February. Homebuilders have benefited from tight inventory in the resale market over the past year.
Existing home sales figures released Thursday are expected to show a decline in March as elevated mortgage rates and prices continue to limit demand. After briefly falling below 7%, the average 30-year fixed mortgage rate has risen amid expectations that the Federal Reserve will not cut borrowing costs anytime soon.
The Fed's public events calendar is packed. In addition to Powell on Tuesday, New York Fed President John Williams will appear on Bloomberg Television on Monday, and other appearances include Vice Chairman Philip Jefferson and regional Fed Presidents Mary Daly, Thomas Barkin, Loretta Mester, Austan Goolsbee and Raphael Bostic.
Canadian inflation data for March released on Tuesday could show a slight increase due to higher gasoline prices. Core metrics will be put to the test, with Bank of Canada Governor Tiff Macklem hoping for continued downward momentum in underlying pressures before cutting rates.
Finance Minister Chrystia Freeland will publish her budget on the same day. It has already announced several costly items while promising to keep the deficit at C$40 billion ($29.2 billion).
Asia
China is in the spotlight. The release of first-quarter gross domestic product data on Tuesday is expected to show the country is on track to meet the official 5% growth forecast for 2024.
First-quarter expansion is likely to have been exactly 5% year-on-year, a result that would still suggest slightly more policy support, although Goldman Sachs expects a more robust annual growth rate of 7.5% for the first three months.
Industrial production growth is expected to slow in March while retail sales remain stable. The decline in real estate investment may have accelerated somewhat.
China ends the week with trade data expected to show slower overall export growth in March, largely due to a strong base last year.
Elsewhere, consumer inflation in Japan is expected to have slowed to 2.7% in March, meaning the rate has remained at or above the BOJ's 2% target for a full two years. Japan also receives trade statistics indicating that export growth will remain stable.
New Zealand has first-quarter data that could suggest price growth is accelerating compared to the previous period, and Australia's unemployment rate is expected to rise in March.
Malaysia also releases first quarter GDP and Singapore releases March trade figures.
Europe, Middle East, Africa
The region's data highlight will be the United Kingdom. The wage numbers in the consumer price report on Tuesday and Wednesday will be reviewed by BOE officials as they consider when to begin cutting interest rates.
With the outcome for underlying inflation, which excludes volatile elements such as energy, still expected to be above 4% and an even higher outcome for wage growth likely, policymakers can take limited comfort from the numbers.
Retail sales are also due out later in the week, which could point to the strength of the British consumer at a time when the economy is showing signs of a factory-led recovery taking hold.
Meanwhile, in the euro zone, industrial production will be the key data point on Monday, with economists expecting a rise in February that will not offset a slump the previous month. The German ZEW investor sentiment index will also be published.
In Nigeria, data is expected on Monday showing annual inflation accelerated in March from 31.7% in February, driven by a sharp fall in the naira, which lost about 30% of its value against the dollar in the first quarter lost. This was largely due to a second devaluation in January aimed at allowing the naira to trade more freely and closing the gap with the unofficial market rate.
Data from Israel is expected to show that inflation remained subdued, accelerating slightly to 2.6% in March from 2.5% as the war against Hamas continues to drag down consumption.
In South Africa on Wednesday, prices are expected to grow 5.4% in March, compared to 5.6% in the previous month, due to higher fuel costs.
The monetary authority in neighboring Namibia is expected to keep its key interest rate unchanged at 7.75% to preserve its peg to the rand and because of upside risks to its inflation outlook from drought conditions and higher oil prices.
In general, most of the attention will be focused on the other side of the Atlantic, where almost all of the region's finance ministers and central bankers are in Washington for the IMF meeting.
Latin America
The initial consensus is that Colombia's GDP proxy data came in lower as weak domestic demand and tight financial conditions slowed growth after a rise in January.
Separate reports may also show that manufacturing, industrial production and retail sales posted negative numbers for the 12th straight month.
Peru's GDP proxy readings for February are expected to accelerate for the second month as the economy recovers from last year's recession, the worst in 33 years. Unemployment in March for the capital Lima is also under discussion.
A few weeks away in Argentina and Chile are the publication of March trading results in Argentina and the publication of the Central Bank's trader survey in Chile.
Mexico will also remain largely quiet, releasing only the weekly report on international reserves and retail sales for February, where January saw negative readings for both the monthly and annual series.
Brazil's central bank releases its weekly expectations survey – analysts don't see inflation returning to target until 2027 – and its February GDP proxy report.
The surprise Brazilian growth story of 2023 marked a strong end to the year that stretched into January.
The combination of a slightly negative output gap and falling interest rates continues to keep consumer demand buoyant, highlighted by the 8.2% increase in retail sales in February.
– With support from Brian Fowler, Robert Jameson, Laura Dhillon Kane, Vince Golle, Monique Vanek and Eric Martin.
(Updates with geopolitical risk from first paragraph.)
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