Take Two: OECD raises 2022 global growth forecast, Fed minutes confirm hikes may slow

What do you need to know?

The world economy will face a “significant growth slowdown” next year but should avoid a global recession, according to the Organisation for Economic Co-operation and Development (OECD). It revised up its forecast for global GDP growth to 3.1% this year from 3% projected in September – but confirmed it is expected to slow to 2.2% next year before picking up to 2.7% in 2024. Asia is predicted to be a “main engine of growth” while Europe will be hit hardest by the global economic slowdown – with the UK set to contract the most out of the world’s largest individual economies. The OECD suggests continued tightening of monetary policy will be needed.

Around the world

The pace of US interest rate hikes could soon slow, minutes from the latest rate-setting meeting of the US Federal Open Market Committee confirmed. Policymakers agreed a fourth successive 75-basis-point increase on 2 November, but a “substantial majority” felt it would “likely soon be appropriate” to scale back their battle with sustained inflation. The risks of excess tightening were highlighted by initial estimates for business activity in November as shown in Purchasing Managers’ Indices (PMIs). The US composite PMI was at 46.3, falling from 48.2 in October. The manufacturing PMI fell 47.6 from 50.4. A reading below 50 indicates a contraction.

Figure in focus: $85

Oil prices fell sharply on Wednesday with Brent futures heading below $85 per barrel for the first time since early October as record levels of daily COVID-19 cases in China, and a tightening of restrictions in some of its cities, weighed on demand expectations. Sentiment was also affected by a greater-than-expected increase in US gasoline inventories and a potential price cap on Russian oil. Suggestions were that the G7-proposed cap could be relatively high – meaning less chance of a supply shortage if it is still profitable for Russia to sell its oil. Brent was trading back above $86 on Friday morning.

Words of wisdom: Loss and damage

A term used by the United Nations to refer to the harm caused by climate change which goes beyond adaption and mitigation efforts. As COP27 came to an end, it delivered on a breakthrough ‘loss and damage’ fund designed to help developing countries that have suffered from climate-related extreme weather and rising sea levels. However, further details will be needed to understand how the fund might materialise, and after two weeks of negotiations and 40 hours of ‘overtime’, the summit was largely viewed as falling short on delivering tangible climate action.

What’s coming up

Japan’s unemployment rate for October and Canada’s third quarter (Q3) GDP data arrive on Tuesday, as do the latest Eurozone Industrial, Economic and Services sentiment indices. The bloc follows up with flash inflation numbers on Wednesday when a second estimate for US Q3 economic growth also lands. Thursday sees final PMIs for November covering the Eurozone and the US published, and on Friday, US and Canadian employment numbers are reported.