January Global Macro Monthly - 2023 starts on a more positive note

Key points

• The broad shape of the outlook for 2023 remains intact: global growth looks set to slow, headline inflation should fall sharply and central banks should reach peak rates over the coming months around the world.
• Yet the start of 2023 has included a number of positive surprises, including a mild winter that could see the Euro area escape a winter recession, a faster removal of China’s ‘Zero-COVID policy’ boosting growth prospects for later in the year and a more resilient US end to 2022.
• Markets have welcomed the more positive news. However, we think it comes with risks of slowing the overall disinflation expected over the coming years and threatening the need for further or more persistent tighter monetary policy from central banks.
• Moreover, the US economy still suggests the likelihood of falling into recession this year - albeit that the timing looks more uncertain. This may cause further tensions if growth cycles occur more asynchronously this year