Global economy cooling

There are currently increasing indications that global economic growth will slow down in the coming quarters. The leading indicator of the OECD for the world economy weakened in April to an index value of around 100.2. In the downturns since 2000, it took an average of around 12 months to reach the cyclical low from this index level in times of growth slowdown. Based on this data, the cyclical cooling of the global economy could therefore last until spring 2023.

Currently, the significant increase in inflation in some economies such as the Eurozone is already putting a considerable strain on private consumption. The outbreak of war in Ukraine has exacerbated the rise in inflation at a global level through energy and food prices. Unfortunately, there are no signs of any significant relaxation here in the short term. The current cooling of commodity prices that are sensitive to the economy, such as copper, could dampen global inflationary pressures in the longer term. On the other hand, falling raw material prices are another indicator of a slowdown in the global economy.

In addition, unexpectedly strict Covid-related containment measures in China are further clouding the global economic outlook. This could again exacerbate the problems within the value chains. The sharp slump in sentiment among purchasing managers in April suggests that China's economy is currently under severe pressure. Due to a health system that is still poorly developed compared to the EU, the Chinese government believes that the strict restriction measures are unavoidable. However, this also means that far-reaching restriction measures in the event of further virus mutations could lead to renewed burdens on China's economy in the coming years.

In view of the high rates of inflation, unlike the cyclical cooling phases of the recent past, the global economy cannot initially count on any support from the important central banks. On the contrary, both the US Fed and the ECB are only just beginning to tighten their monetary policy. With the exception of southern Europe, there are no signs of any significant fiscal policy support for the economy in other countries in the Eurozone. We are currently expecting GDP growth of 2.8% for the Eurozone in 2022. In view of the increasing risks for the global economy, however, this forecast is subject to downside risks.

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