(Bloomberg) — If the global economy is headed for a soft landing, there will be plenty to worry about, 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 will face a combination of slow growth, stubborn inflation, high interest rates and debt levels, and market-political risks. From Kiev to Tel Aviv.
Bloomberg Economics now sees global activity slowing to 2.9% this year – which it says is a „best escape” from a 0.2 percentage point improvement from December – but still „below” the pre-pandemic pace.
IMF chief Kristalina Georgieva has signaled that the fund will release its forecast on Tuesday, raising it slightly from the current 3.1%, while warning that the world is headed for a „slow and disappointing decade”.
Against that backdrop, investors will be keeping a close eye on key participants in the meetings. Scheduled speakers include Federal Reserve Chairman Jerome Powell, US Treasury Secretary Janet Yellen, UK Chancellor of the Exchequer Jeremy Hunt and the heads of the European Central Bank, Bank of Japan and Bank of England.
Current politics have hampered the G-20 in recent meetings, and risks again fracturing its membership.
As Russia's war in Ukraine drags into its third year, U.S. military support in question and Kevin's ability to pay for bullets and bond coupons are increasing. Meanwhile, the Israel-Hamas war in Gaza threatens to plunge the Middle East into wider turmoil.
Iran launched more than 200 ballistic and cruise missiles and attack drones against Israel on Saturday.
Both conflicts revolve around some of the world's biggest petroleum suppliers and drive up energy prices, a worrying sign for inflation fighters.
The IMF has warned of a geopolitically driven fragmentation of the global economy. The divide is broadly between the US and the EU on one side and China and Russia on the other – a key battleground for trade and influence with the Global South.
Asked about geopolitical instability, Georgieva said, „Because it's a more diverse world, we need to connect more. „It's a world where we see differences not only in economic fortunes, but also in motives.”
The coming week will also focus on the deepening debt woes among many emerging market countries, which have benefited from nearly two decades of cheap money, mostly from China. Poor countries are now scrambling to regain access to capital as creditors fight for their share of the action, a contest that has profound implications for Beijing's influence over the global financial system.
Here's what Bloomberg Economics says:
„Compared to expectations that the cost of controlling runaway inflation will be a rash of recessions, a year of moderately slower global growth looks like a big escape.
The next big question – will central bank pivots belatedly with surprisingly strong growth? We have pushed back our call for central bank action to July – even earlier than many in the market expected.”
– Tom Orlick, Chief Economist For full analysis, click here
Elsewhere, Chinese economic data, UK inflation and wage numbers and Canada's budget will be key highlights.
Click here to find out what happened last week and below is our summary of what's to come in the global economy.
USA and Canada
The U.S. data calendar opens Monday with retail sales, and economists project a modest improvement as the first quarter ends, underscoring a resilient and cautious consumer. The figures do not take into account the impact of inflation and mostly reflect business costs.
The March data will provide a more comprehensive view of housing demand, adjusting for inflation, including spending on utilities later in the month.
In housing data for the week ahead, a government report on Tuesday showed home building starts rebounded in March after a firm February advance. Homebuilders took advantage of low inventory in the resale market last year.
Home sales figures due on Thursday are expected to show a decline in March as elevated mortgage rates and prices continue to curb demand. After briefly dipping below 7%, the average 30-year fixed-mortgage rate rose on expectations that the Federal Reserve would not cut borrowing costs quickly.
The central bank's calendar of public events is packed. Along with Powell on Tuesday, New York Fed President John Williams appeared on Bloomberg Television on Monday, and other appearances included Vice Chair Philip Jefferson and regional Fed Chairs Mary Daly, Thomas Parkin, Loretta Meister, Austin Goolsbee and Raphael Bostick.
Canadian inflation data for March released on Tuesday may show a slight uptick in higher gasoline prices. Key metrics will come under scrutiny, with Bank of Canada Governor Tiff Macklem looking for sustained downward momentum in fundamental pressures before cutting rates.
Finance Minister Chrystia Freeland will release her budget on the same day. He has already announced several big-ticket items, pledging to keep the deficit at C$40 billion ($29.2 billion).
Asia
China is in the spotlight, with first-quarter gross domestic product data released on Tuesday showing it is on track to meet the official 5% growth forecast for 2024.
First-quarter expansion could be exactly 5% year-on-year, a result that could support a little more policy support, although Goldman Sachs expects a much stronger 7.5% annualized growth rate for the first three months. .
Industrial production growth slowed in March, while retail sales were flat. The decline in property investment may have accelerated slightly.
China ends the week with trade data expected to show slower headline growth in exports in March, mainly due to a higher base last year.
Elsewhere, consumer inflation in Japan eased to 2.7% in March, marking a two-year run at or above the BOJ's 2% target. Japan is also receiving trade figures that are projected to show steady growth in exports.
New Zealand has data for the first quarter, which may show price growth from the previous period, and Australia's unemployment rate rose in March.
Malaysia also publishes first-quarter GDP and Singapore publishes March trade figures.
Europe, Middle East, Africa
Data by region will highlight the UK. Payroll numbers from Tuesday and Wednesday's Consumer Price Report will be scrutinized by BOE officials.
As core inflation, stripped of volatile components such as energy, is still likely to fall above 4%, and an even higher end to wage growth is possible, policymakers may derive only limited comfort from the numbers.
Retail sales will also be released later in the week, which could point to strength in British consumers at a time when the economy is showing signs of a factory-led recovery.
Meanwhile, in the euro zone, industrial production will be the key data point on Monday, with the increase expected by economists in February unlikely to offset a decline in the previous month. Germany's ZEW Investor Sentiment Index will also be released.
In Nigeria on Monday, data is expected to show that annual inflation accelerated in March from 31.7% in February due to a sharp fall in the naira, which lost about 30% of its value against the dollar in the first quarter. 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 will show that inflation edged up slightly to 2.6% in March from 2.5%, as the war against Hamas continues to fuel a decline in consumption.
In South Africa on Wednesday, price growth was forecast at 5.4% in March compared to 5.6% a month earlier due to higher fuel costs.
The monetary authority in neighboring Namibia is expected to keep its key rate unchanged at 7.75%, and there are downside risks to its inflation outlook due to drought conditions and higher oil prices.
Attention will usually focus 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 early consensus was that Colombia's GDP-proxy data printed lower as weaker domestic demand and tighter financial conditions slowed growth after an improvement in January.
Separate reports also showed that manufacturing, industrial production and retail sales all posted negative prints for the 12th consecutive month.
As the economy recovers from last year's recession, Peru's GDP-proxy readings for February could accelerate for a second straight month, the worst in 33 years. Lima, the capital, also has unemployment in March.
Light weeks in Argentina and Chile will be followed by the release of the former and central bank traders' survey of March trading results.
Mexico is also mostly quiet, offering only the weekly international balance report and retail sales figures for February, which saw negative readings for the monthly and annual series in January.
Brazil's central bank releases its weekly expectations survey – where analysts don't see inflation on target before 2027 – and its February GDP-proxy report.
A surprising 2023 Brazilian growth story has a strong end to the year that stretched into January.
A combination of a slightly negative output gap and falling interest rates, underscored by February's 8.2% rise in retail sales, is sustaining buoyant consumer demand.
– With assistance from Brian Fowler, Robert Jameson, Laura Dillon Kane, Vince Cole, Monique Vanek and Eric Martin.
(Updates with geopolitical risk from the first column.)
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