“Economic pessimism abounds and it’s easy to see why,” says senior economist at Allianz GI – Executive Digest

Monetary tightening, yield curve inversions, housing market swings, bank lending restrictions, all these factors are usually associated with recession and did not favor an optimistic view of the global economy.

Despite this scenario, the latest GDP figures show that, for example, the US economy is growing at around 2%, which is reflected in real gains for consumers.

“How is that? One of the reasons why growth has remained resilient is excess savings. The accrual of these funds probably amounted to about $1.2 billion. [1,1 biliões de euros] by the end of 2022, according to Fed data and our calculations,” explains Greg Meier, Director and Senior Economist at Allianz Global Investors.

According to Greg Meier, this scenario has created a “strange environment” among consumers who are complaining but at the same time can afford to increase their spending.

With a climate of “economic pessimism” hovering, the week ahead will be marked by China’s fixed investment data on Tuesday, which comes in after reopening after major restrictions stemming from the pandemic. The government’s new growth target for 2023 of “around 5%” was at the lower end of market expectations.

The focus should then shift from China to the US, where investors will digest the latest major inflation report ahead of the March 20-21 Fed meeting.

Consensus estimates point to underlying price resilience, with forecasts pointing to a third straight monthly rise of 0.4% in the CPI inflation index. “While annual inflation could ease from 5.6% to 5.4%, this is partly due to base effects (and indeed more than double the Fed’s 2% target),” explains Allianz GI senior economist.

Greg Mayer highlights, however, that the main event in the eurozone next week is Thursday’s decision by the European Central Bank (ECB), where a new interest rate increase of 50 basis points is expected. The question remains whether new increases will be announced in the future.

“Preliminary estimates showed that inflation in the Eurozone rose 8.5% year-on-year in February, more than the consensus forecast for 8.2%. The final numbers – scheduled to be announced on Friday – could show an increase of 8.6%,” he explains.

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