Kerry Craig

Macroscope | Amid market turmoil, the global economy is not doing too badly

Economists have raised their expectations for first-quarter growth as data points to the resilience of the global economy and even a building of momentum

However, the outlook for growth is complicated given that central banks must now balance controlling inflation, the prospect of slowing growth and financial stability risks

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A staff member assembles a natural gas pipeline for a vehicle at the new energy factory of Zhengzhou Yutong Bus Co in central China’s Henan province on March 8. The economic releases capturing China activity in January and February showed a pickup in the manufacturing and services segments of the economy as well as an increase in retail sales. Photo: Xinhua

Kerry Craig

Published: 9:30pm, 24 Mar 2023

The shocks that have rippled across financial markets in the past few weeks have commanded almost the full attention of investors and market commentators, and rightly so. As the full impact of a year of successive and larger-than-normal interest rate increases from central banks establish themselves, the rates outlook will continue to dominate the financial market landscape and news headlines.

But many other things have happened in the background that would have normally garnered attention. Below are some trends that investors may have missed in last week’s deluge of headlines.

The first three months of the year are shaping up to be better for the economy but worse for markets.

Economists have actually raised their expectations for first-quarter economic growth. Much of the economic data received in the last few weeks has pointed squarely towards the resilience of the global economy and even a building of economic momentum.

This is in stark contrast to the stress that is building in global financial conditions, with growing talk of recession and parallels being drawn to the 2008 global financial crisis. According to Factset, the consensus view by economists for first-quarter growth for the United States, euro zone, Canada, China and Japan all rose when compared to January estimates.

An economy that is larger than three months ago is good news, especially given where things may be heading. Better growth in the first quarter creates some breathing room for those economies facing pressures from tighter credit conditions and a looming slowdown. Less good is the news is that central bankers have spent the last 12 months raising interest rates as they attempt to slow the economy to bring inflation to heel.