Fears of recession shaped budgeting season 2022 and how companies approached planning for this year. But not all of this has materialized. The US slowdown is happening much more gradually than expected; Europe avoided the worst risks of power outages and deep recession last winter; and China reopened well ahead of anyone’s predictions. All of these factors are providing a cushion to global growth in 2023, which is slowing but still is likely to average 2.6% YOY this year, down from 3.3% YOY in 2022. But what does this mean for 2024? Will it be a year of recovery after this year’s slump, or are we expecting a worse performance as credit costs hit consumers and stretched governments cut budgets?
The answer is anything but straightforward. We’re seeing major economies hitting their weakest points in this cycle on a different timeline – with the US likely to experience growth bottoming out in late 2023-early 2024, while China saw a challenging Q1 but a gradual improvement in conditions. Europe’s poorest growth this year may already be behind it. These dynamics are providing a helpful cushion for smaller markets. And much of it is due to the strength of consumers. Despite big hits to purchasing power from the inflationary shocks of 2021-2023, tight labor markets and some wage growth (though mostly still nominal) are supporting consumer activity, even as price sensitivity increases. In our recent discussion with clients on the outlook for 2024, only 17% of companies we polled said they were not planning prices increases in 2024 – a clear indication their confidence in the resilience of demand.
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