The global economy has demonstrated resilience in 2023 despite fluctuating data and persistent uncertainties. Early in the year, expectations of increased U.S. tariffs led to a surge in imports, which in turn boosted export activity among major economies. However, this momentum reversed later, contributing to volatility in trade figures. Nevertheless, overall GDP performance has exceeded forecasts, supported by strong labor markets, a partial rebound in consumer spending power, and renewed business investment, all of which have lifted economic sentiment and investor confidence.
A key factor behind the improved outlook has been the reduction in macroeconomic uncertainty. Recent trade agreements involving the United States have helped clarify the future international trade environment and reduced the likelihood of worst-case scenarios—at least over the near term. That said, the global economy still faces a higher baseline of tariffs than in previous years, and uncertainty remains due to unresolved negotiations, particularly between the U.S. and China, as well as legal ambiguities and questions about the longevity of current deals.
Looking ahead, favorable energy conditions are expected to support growth. Oil markets continue to show a surplus, keeping Brent crude prices around 65 dollars per barrel. Similarly, European natural gas futures suggest stability, with the TTF benchmark hovering near 35 euros per megawatt-hour. Monetary policy is also no longer acting as a drag on expansion. In the eurozone, the European Central Bank has settled its key interest rates at a neutral 2.00%, a level that neither stimulates nor restrains economic activity. After cutting rates by 100 basis points between February and June, the ECB appears content to maintain this stance given inflation has reached its target, reserving any future adjustments for significant shifts in economic conditions.
Meanwhile, the U.S. Federal Reserve has resumed lowering borrowing costs following signs of a slowdown in job growth and a measured impact of tariffs on inflation. This shift reflects a more balanced approach to employment and price stability, suggesting a gradual series of rate reductions in the coming quarters. Additionally, China’s economy continues to play a supportive role globally. Despite ongoing challenges such as a struggling property sector and subdued domestic demand, Chinese industrial output and exports have remained robust, and analyst projections for the country have shown a positive trend.
Under this scenario, U.S. economic activity is projected to remain solid. Growth is expected to moderate slightly due to labor market normalization but will be sustained by investments in artificial intelligence and a more accommodative monetary environment. As a result, annual GDP expansion is forecast to approach 2%. However, risks remain, including the possibility that inflation may prove sticky in reaching the final stretch to 2%, the burden of sustained high fiscal deficits, and the potential delayed effects of tariffs on both economic output and price levels.
— news from CaixaBank Research
— News Original —
International economic scenario: tariff hikes vs. respite in uncertainty
So far this year, the scenario has been characterised by volatility in the data and the resilience of the international economy in the face of uncertainty. Initially, the anticipation of new US tariffs triggered a boom in the country’s imports and spurred exports from the other major economies, an effect which was then unwound, causing swings in the data. Despite the volatility, GDP figures have performed better than anticipated, with a common support factor in robust labour markets and a certain recovery in purchasing power and investment, leading to an improvement in economic expectations and investor sentiment. n nThe improvement in expectations has also been supported by a moderation of uncertainty. The various trade agreements that the US has reached have helped to gradually clarify the trading landscape in which the world economy will operate going forward, while also helping to rule out extreme scenarios, at least in the short term. That said, the global economy will have to adapt to a significantly higher level of tariffs and the uncertainty, although in retreat, has not faded completely (several negotiations remain pending, such as between the US and China, and there are doubts over the durability of the agreements reached, legal uncertainties, etc.). n nFrom this new starting point, the outlook enjoys the support of contained energy prices, thanks to an oil market that continues to exhibit excess supply and in which the Brent barrel is expected to hover at around 65 dollars per barrel, while gas futures point to a stable European TTF price of around 35 euros/MWh. Also, monetary policy will no longer weigh down the economy. In the euro area, the ECB’s interest rates are at a neutral level of 2.00%, where they neither stimulate nor restrict economic activity. After lowering them by 100 bps between February and June, all the indicators (including both the central bank’s own messaging and market prices) suggest that, with inflation at the target rate, the ECB will prefer to keep rates at their current levels and will reserve the option to alter them only in the event of a significant change in the outlook. The Fed, meanwhile, has resumed its rate cuts after noting a slowdown in job creation and a moderate and gradual impact of tariffs on inflation. It is thus exhibiting a different sensitivity to the balance of employment/inflation data, which leads us to expect a gradual pattern of rate cuts over the coming quarters. On the other hand, international economic activity is also expected to continue enjoying the support of the Chinese economy. Indeed, despite the tariffs and the country’s persistent housing crisis and weak domestic demand, China’s exports and industry have held up well, while analyst consensus expectations for the country have continued to improve. n nThus, our scenario predicts that US economic activity will remain relatively dynamic and that, with a cooling due to the normalisation of the labour market, and fuelled by investment linked to AI and less restrictive monetary conditions, the country’s GDP will approach an annual growth rate of 2%. However, this improvement in the outlook remains subject to downside risks, ranging from inflation resisting the last mile to the 2% target, to the digestion of government deficits that are predicted to remain high, to the transmission of tariffs to economic activity and inflation which, so far, has been modest.