Global economy continues to cool: is recession imminent?

In this feature, IPC’s chief economist, Shawn DuBravac, summarises the key take aways from the IPC’s May 2023 Economic Outlook

Per IPC’s May 2023 Economic Outlook report, the global economy continues to cool, but not quite as severely as expected at the start of the year. Stronger than expected growth in 2023 will come at the cost of weaker growth in 2024.

Labor markets remain extremely strong, despite the widely held view that recession is imminent. Both the United States and Europe are enjoying record low levels of unemployment. Strong labor markets and solid wage growth are likely to keep inflationary pressures stubbornly high.

IPC’s chief economist, Shawn DuBravac, said: “Consumer confidence fell sharply in the last month, erasing half of the gains since the all-time low levels of June 2022. Business confidence has also been weak. Manufacturers report a subdued outlook in both the US and Europe. Leading economic indicators continue to suggest a high risk of recession this year, even if the timing continues to push later into the year.”

Additional data in the Outlook show:

• US consumer sentiment fell in May, declining nearly seven per cent. The debate over the debt ceiling likely contributed to some of this decline

• US manufacturing sentiment contracted for the fifth consecutive month in April. The manufacturing PMI rose 0.8 percentage points in the last month, but not enough to move back into expansionary territory

• The European economy grew during the first quarter of the year, edging up 0.1 per cent in the euro area and up 0.2 percent in the EU

• Electronics manufacturing output fell in March, decreasing a sharp 5.9 per cent from the prior month and 1.7 per cent from the year-ago period