September Global Macro Monthly - Summer passes, winter’s coming

Key points

• An energy crunch appears to be materialising with Germany and CEE countries most affected.
• We forecast recession in the Eurozone, with a sharp contraction in coming quarters. The UK also looks set to experience recession, despite a fiscal package that has undermined confidence in UK markets.
• Chinese activity struggles on housing restructuring and COVID. We lower our 2022 growth outlook to 3%.
• US activity has been mixed, with falling gasoline providing short-term relief. Still there is overwhelming expectation of stagnation or outright contraction.
• The Fed continues to tighten policy aggressively. While most other central banks follow, the dollar continues to rise, threatening broader instability.
• Financial conditions have tightened. The rate outlook will ease only once tighter conditions visibly slow growth.