This post will highlight relevant macroeconomic factors that concern the US and Europe.

US: Better, But Not Great

There are several positive elements here. Inflation and the labour market look good (unemployment is low and job openings are high). However, gas and food prices remain relatively high, impacting consumer confidence. While energy prices have normalized somewhat, food prices have not.

Both manufacturing and service industries have stabilized to pre-Covid levels, which is a good sign. Mirroring what we said about consumer confidence, household inflation expectations are growing. The University of Michigan’s survey revealed that five-year expectations have risen to their highest level since 2011.

Several interest rate cuts are expected in 2024.

Europe and the UK: Muted Growth

UK households are facing the effects of monetary policy through the upcoming renewal of two-year mortgages from pre-Q3 2022. In Europe, we can see the effects of central bank policy through weakening investment demand.

Most of the fall in inflation comes from the drop in energy prices as well as food. However, the rise of both industrial goods and services prices has been slowing as well. Employment looks fine.

Inflation is expected to drop further than wages, which is a good sign for real income.

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