Bloomberg Businessweek (January 15, 2024)

Год выпуска: January 15, 2024

Автор: Bloomberg Businessweek

Жанр: Бизнес

Издательство: «Bloomberg Businessweek»

Формат: PDF (журнал на английском языке)

Качество: OCR

Количество страниц: 84

The Global Economy’s Pressure Points

The global economy was tested in 2023 as it rarely has been before: inflation and the most aggressive monetary tightening campaign in decades, wars in Europe and the Middle East, a festering real estate crisis in China and the deepening rivalry between the US and China, which is forcing companies to rethink supply chains and security.

Despite these pain points, the post-pandemic global recovery managed to roll on. In the US consumers defied expectations and kept spending, prompting many economists to ditch their downside scenarios and forecast a rare soft landing. In China the booming electric-vehicle industry — along with a healthy dose of fiscal stimulus — helped leaders stick close to their growth target. And the world economy’s great new hope, India, took up some of the slack.

The International Monetary Fund forecasts global growth of 2.9% in 2024, a whisker below last year. With two wars raging and some 40 national elections on the calendar, political developments will shape the year, especially as Donald Trump makes a go at winning back the presidency. But crucial economic stress points could upend the benign outlook.

JAPAN’S RISKY EXIT FROM NEGATIVE RATES

The country’s decades-long experiment with unorthodox monetary policies is nearing its final chapter. The yawning gap between yields of Japanese and US government bonds in November helped drive the yen to its lowest level since the early 1990s, pushing up the cost of imported fuel and food and eating into purchasing power. With inflation hovering above the Bank of Japan’s 2% target for more than a year and a half, Governor Kazuo Ueda is widely expected to abandon the world’s last remaining negative interest rates as he inches away from the yield curve control framework he inherited from his predecessor.

He’ll have to tread carefully. For a generation, pension funds, insurers, banks and even mom and pop investors have parked their money in assets overseas to earn some interest, making Japan the world’s top creditor nation. If Japanese government bonds start to offer better returns, trillions of yen could rush back home, causing immense disruption to global financial markets. For Ueda, moving too quickly risks snuffing out the long-sought return of sustainable price rises. Too slow, and the markets may be emboldened to test the BOJ’s resolve to maintain yield levels — risking an even sharper dive for the yen.

CAN CHINA KEEP A LID ON THE HOUSING CRISIS?

The world’s second-biggest economy is in the midst of a multiyear slowdown, triggered in part by President Xi Jinping’s crackdown on real estate speculation. Developers are saddled with vast portfolios of “rotten tails”— apartments that were bought but never built. Nomura Securities Co. estimates that some 20 million units were presold for which construction has been delayed or hasn’t started. Those waiting for their new apartments are becoming increasingly impatient, turning the issue into a potential threat to social stability. Top officials have pledged to prevent a cascade of debt defaults by developers—a disaster that would engulf the banking sector and potentially doom China to a Japan-like lost decade of anemic growth. This may be the year that the slow drip of government measures gives way to a full-blown bailout.

EUROPEAN LAGGARD

Germany was the worst performer among major economies in 2023. High energy prices and tight monetary policy, coupled with weaker global demand for its exports, caused a slight contraction in gross domestic product for the year. There’s no shortage of problems going into 2024, including the ongoing war in Ukraine, an auto industry facing intense competition from Chinese-made EVs and tighter controls on government spending. The country’s world-beating manufacturing sector must contend with a costly and politically fraught transition to alternate forms of energy after losing access to cheap gas piped in from Russia, as well as a reshuffling of supply chains in response to a US-led effort to contain China. For a read on whether the malaise is easing or deepening, watch the Ifo Institute’s index of business expectations.

WILL THE AMERICAN CONSUMER CAPITULATE?

After a blockbuster 2023, the US economy is expected to come back to earth in the coming 12 months. Whether that’s a recession or a soft landing will depend in good part on how the job market holds up. So far it’s shrugged off the Federal Reserve’s barrage of interest-rate increases, but this year could see an inflection point even though policymakers have signaled they’re done hiking. An uptick in unemployment would hit consumer spending, which in the US accounts for almost two-thirds of economic output. The Fed’s latest projections show the jobless rate climbing to 4.1% by the end of the year. Unemployment claims, published weekly, are a leading indicator of labor market softness and therefore merit watching.

CAN INDIA LIVE UP TO ITS PROMISE?

As China settles into a slower growth track, economists are looking to India to eventually take over as the new global growth engine. It’s a lot to live up to, and with Prime Minister Narendra Modi facing an election sometime in April or May, politics will add to the challenge.

Goldman Sachs Group Inc. economists expect increased government spending to be the main growth driver going into the vote, with private-sector investment taking over in the second half of the year. Yet while India has been growing faster than just about any other major economy, the unemployment rate climbed above 10% in October, the highest in two years, according to the Centre for Monitoring Indian Economy. What’s more, the labor participation rate for women is stuck below 60%. Economists at HSBC Holdings Plc say that even if economic growth can accelerate to 7.5% per year over the next decade, only about 45 million of the 70 million jobs needed to match India’s growing population will be created, leaving 25 million people behind.

Malcolm Scott and Enda Curran

INTRODUCTION

• Like us, you probably thought 2023 was a lot. Well, you may want to sit down for this next bit...

WHAT TO EXPECT

• Five trouble spots that could upend your plans
• Bloomberg Economics’ forecast for global growth
• AI seems like it’s on acid. That’s a good thing
• Cocktails that give you a buzz without the booze
• Some intriguing ETFs for your consideration
• Once again, Bibi Netanyahu is in a bind
• America isn’t racing into its EV future
• Apple gets dragged into the US-China trade war
• Hollywood desperately searches for its next act
• The best consumer gadgets on the way
• What might happen in a second Trump term
• Weight-loss drugs will fatten up Big Pharma
• Who will score the NBA’s TV rights?
• Putin could actually win in Ukraine
• Of course Wonder Woman makes mac and cheese
• Private equity’s rough year is likely to repeat
• The Olympics come to Paris
• Ten page-turners to look forward to in 2024
• The planet gets “gobsmackingly” hot
• A rosy forecast for M&A
• Washington finds a new tool to use against Beijing

50 COMPANIES TO WATCH

• It’s shaping up to be an interesting year at Accenture, Barclays, Disney and 47 others

FEATURES

• Populism, from the left and the right, is on the ballot in November
• Meta is poised to become a big player in AI—or suffer from another case of Zuckerberg whiplash
• For the class of 2024, the world will be even braver and newer than usual

PURSUITS

• Where you’ll want to go this year—from Ucluelet to Lima to Bergen to Busan to Kangaroo Island

BACKPAGE

• What we got wrong and right in 2023

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