Global Forecast Update (September 2022)

Headwinds to global growth are expected to increase in coming quarters. Global leading indicators point to weakening momentum, and global purchasing manager indexes are sliding and nearing contractionary territory. Indeed, The Conference Board now expects mild recessions to occur in the US and Europe later in 2022 and into early 2023. The US recession is likely to be induced by aggressive monetary policy tightening in response to elevated inflation, and the recession in Europe likely will reflect surging energy prices and rationing. China may escape recession but will experience weak growth in 2022 due to repeated lockdowns, a housing correction, and weakening external growth, and will experience only a modest recovery in 2023. Our forecast for global GDP is for 2.7 percent growth in 2022 and 1.7 percent in 2023. 

United States

Notwithstanding two consecutive quarters of negative GDP growth, we do not believe the US economy is currently in recession given strength across a number of sectors and the extremely tight labor market. However, we do expect that a broad downturn is on its way. This outlook is associated with persistent inflation and hawkishness by the Federal Reserve. We forecast that 2022 real GDP growth will come in at 1.4 percent year-over-year and that 2023 growth will slow to 0.3 percent year-over-year. These projections are slightly higher than our August forecasts but largely due to upward revisions to past quarters and somewhat better-than-expected economic data for Q3 2022. 

Europe

Given stronger-than-expected data for the first half of the year, forecasts for the full year 2022 are revised upward for the Euro Area. But as headwinds are intensifying, we have lowered our 2023 GDP growth estimates, assuming a technical recession is likely to occur later this year. Business and consumer sentiment has turned sour relatively quickly, and our leading indicator for Germany is currently signaling recession ahead. Despite mitigation plans at the country and EU-level to account for reduced natural gas imports from Russia, energy consumption will be constrained, either voluntarily or because of restrictions, which will limit economic activity. Higher energy prices dampen consumer confidence and consumer spending. Inflationary pressures are not abating, forcing central banks in the region to tighten more quickly, thus cooling economic activity further. Our GDP forecast for the Euro Area for 2022 is 3.2 percent and 0.2 percent for 2023. 

China

The full-year 2022 GDP growth projection for China is 3.7 percent. The outlook for China has weakened, with renewed surges in COVID-19 infections over July and August that are dampening consumption as well as the ongoing property downturn. The strong likelihood of more COVID-19 flare-ups, persisting weakness in property investment, and the slowdown in global growth mean that China’s economic recovery is likely to remain weak in the short term. Domestically developed mRNA vaccines and antiviral COVID-19 medication are expected to be broadly distributed in 2023, which should lead to a relaxation of lockdown measures and social distancing restrictions. Policy support is expected to help turn the real estate and property sector around. These factors should help a modest rebound in GDP growth to 5.3 percent for 2023. 

Emerging Markets

Weakening demand and faster policy tightening in the US and Europe are negatively affecting major emerging economies, but there are important differences among them. Russia has likely entered recessionary territory, and Turkey and Brazil are expected to experience severe weakening in growth over the second half of the year. However, economic prospects for India and other developing economies in Asia as well as economies in the Gulf Region are relative bright spots in an otherwise somber outlook. 

For more analysis and data, please see our monthly updated Global Economic Outlook page.