Market uncertainty and the economic slowdown continue to loom as the Russia-Ukraine war raises setbacks. The International Monetary Fund (IMF) forecasts a global GDP growth of 3.6% this year and in 2023. The projection shows a significant decrease compared to a prospective 6.1% in 2021.
The focus today is on the US GDP data. The IMF projected a GDP growth of 3.7% in 2022 for the US, still reassuring compared to other advanced economy. Despite soaring inflation (8.5% in March 2022), the US economy was expected to be strong. Nevertheless, concern over the possibility of a recession lingers, as the FED plans to fight inflation with tighter monetary policy.
Surprising news came from data released by the US Bureau of Economic Analysis. US GDP advance estimate for the first quarter of 2022 fell unexpectedly by 1.4%. Data published was far worse than the consensus estimate of a 1% increase and following an annualized growth of 6.9% in the fourth quarter of 2021. Core Personal Consumption Expenditure (PCE) is at 5.2%, lower than the forecast at 5.4%. The impact of the increase in Omicron cases in the first months of the year, the sharp rise in inflation and the war in Ukraine likely contributed to the reversal of US growth.
Stock indices futures pointed higher before Wall Street open as markets paid little attention to the report. However as trading started in the US, stock markets globally dropped from the day’s high.