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Initial estimates from statistical agencies painted a mixed picture of economic activity in 3Q23. US growth accelerated to a blistering 4.9% Quarter on Quarter (QoQ) annualized while, after a lull in 2Q23, the Chinese economy picked up to show growth of 1.4% QoQ. However, China remains mired by a housing market downturn, house developer defaults and weak consumer confidence. The eurozone economy was lackluster and shrank 0.1% QoQ, having grown 0.2% QoQ in 2Q23. Ireland, which propped up the eurozone in 2Q23, was a significant drag in 3Q23 as its volatile economy shrank by 1.8% QoQ.

A key question is the US’s ability to remain resilient and defy recession. The US jobs market finally showed some signs of softening in October as employment growth slowed to 150,000 jobs Month-on-Month (MoM). Given the very strong economy in 3Q23, a decline in GDP in 4Q23 looks increasingly unlikely. However, we do expect a slowdown of some sort in the first half of 2024 as the very rapid rise in interest rates over the past 18 months continues to feed through. Moreover, a slowdown is likely needed to keep a lid on inflation and stop it from rising again. The narrative on interest rates has shifted to higher- for-longer, particularly for the US, and the 10-year Treasury bond yield touched 5% briefly in October.