US to escape recession as global growth slows – Goldman Sachs

Goldman Sachs economists they expect the United States to narrowly avoid a recession next year as the European economy shrinks. Meanwhile, it is anticipated that the China’s GDP to rise slowly in the first half of 2023, then accelerate as covid restrictions are eased.

A mild recession in Europe

“We expect a global growth of only 1.8% in 2023as US resilience contrasts with a European recession and an uneven reopening in China.”

“US should narrowly avoid recession, as core PCE inflation slows from 5% today to 3% by the end of 2023, with an increase of half a percentage point in the unemployment rate. To keep growth below potential amid higher real income growth, We now see the Fed raising another 125bp to a high of 5-5.25%. We do not expect cuts in 2023“.

“The eurozone and the UK are probably in recession, especially due to the blow to real income caused by the increase in the energy bill. But we only expect a mild recessionas Europe has already managed to cut Russian gas imports without crushing activity and is likely to benefit from the same post-pandemic improvements that are helping to stave off a US recession. Given reduced risks of a deep recession and persistent inflation, now We expect increases until May with a maximum of 3% from the ECB“.

“China is likely to grow slowly in the first halfsince the reopening of April initially triggers an increase in covid cases that requires caution, but should pick up sharply in H2 thanks to reopening momentum. Our longer-term view of China remains cautious given the long slump in the property market, as well as lower potential growth (reflecting both weak demographics and productivity).”