June Global Macro Monthly - A skip and a hop(e)

Key points

• Key event risk has faded: bank turmoil has stabilised and the US debt ceiling was resolved with little disruption.
• Focus returns to cyclical dynamics. Economic signals have been mixed. Eurozone history has been revised to a mild recession over the winter, but broadly activity has been more resilient than we had expected.
• The outlook remains weaker: we expect mild recession in the US, and risks of downturn in the UK and even the Eurozone, although we expect firming activity in China.
• Headline inflation has fallen in most jurisdictions, but core inflation remains stickier, not least with labour markets continuing to suggest second round effects.
• Central banks are being forced into delivering more restrictive policy, even if data-dependency risks being myopic and risks sharper downturns ahead.
• Sovereign debt concerns also rise in advanced economies.