Morning Market Brief: December 6, 2023

Slower activity in major economies could weigh on global growth in 2024 

In its latest Economic Outlook, the Organisation for Economic Co-operation and Development (OECD) said that it expects global economic growth to slow in 2024 compared to 2023. Global economic conditions remain highly uncertain amid geopolitical tensions, tight financial conditions and relatively muted consumer demand. 

1. The OECD expects the global economy to expand by 2.7% in 2024. This would mark a slowdown from the organization’s projection of 2.9% growth this year and would be the slowest pace of growth since 2020, when COVID-19 brought the global economy to a near halt.
2. Ongoing geopolitical tensions, high borrowing costs and elevated inflation might hinder the economy in 2024. There have been signs of tighter monetary policy weighing on consumer and business activity, and this is likely to persist into next year.
3. The OECD believes economic activity in the US and China will likely soften next year, which will drag down global economic growth. While the US economy has proven resilient in 2023, slower consumer spending is expected, which might stall growth. The OECD expects Canada’s economy to expand by only 0.8% next year.
4. The economic organization expects global inflation to moderate further in 2024, inching closer to central bank targets. The OECD expects global inflation to slow to 5.2% in 2024 and 3.8% in 2025.
5. Despite expectations of inflation slowing, it might remain elevated in some countries and regions, and central banks from those areas could leave interest rates higher for longer. In contrast, other central banks might be looking to cut interest rates as inflation slows more quickly and economic conditions wane. Expectations are heightening that the Bank of Canada and US Federal Reserve Board could begin cutting rates next year.

Heading into 2024, economic conditions can best be described as uncertain. Globally, tight financial conditions are taking hold, which is hurting households and businesses. The same is happening here in Canada, where the economy contracted in the third quarter. The ebbs and flows of economic conditions often present attractive opportunities in equity and fixed income markets.

At CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.