Deutsche 2024 Outlook: The Race Against Time

Deutsche has a more pessimistic macro view than most for 2024, writing that "over the last two to three-years we’ve had a fairly consistent macro narrative, viewing this as a classic policy-led boom-bust cycle that would culminate in a US recession towards the end of 2023. We think our narrative still holds."

• Global: 2.4% GDP growth. “The race against time narrative refers to the fact that funding has dried up or tightened considerably over the last couple of years for various parts of economies as rates have risen. Can lending standards loosen, and can yields fall, quickly enough to avoid a funding accident that could see contagion? Non-linearity risk that can turn a mild downturn into a deeper recession remains high.”
• US: 0.6% GDP growth. Edges into mild recession during H1. "monetary policy famously works with lags which are highly uncertain in their timing and impact. A US recession before this point would have been historically relative to the start of the hiking cycle."
• Eurozone: 0.2% GDP growth. "currently in a mild recession in H2 2023 that will stretch into the start of 2024, but the reality is that Euro Area growth has stagnated since Q3 2022 and looks set to do so until mid-way through 2024. So that will mean we will have had nearly two years of near zero growth by then even if there hasn’t been a major slump lower"
• Japan: 0.6% GDP growth. "Japan’s central bank will abandon its yield curve control (YCC) policy as early as January 2024 and growth expected at around 0.5% “attributable mainly to faster wage growth and the continuation of an accommodative monetary policy framework.” Core inflation excluding energy should drop below 2% by H2 but bottom out in the upper 1% range."
• China: 4.7% GDP growth. 2023 disappointing economic data "“met by much stronger macro and administrative support in H2” with the benefits likely to emerge in 2024. The Chinese government is likely to seek a growth target at “above 4.5%” but this depends on support being maintained. “Assuming such support arises, our team sees China’s CPI inflation rebounding to 0.9% in 2024, from 0.3% in 2023.”"
• Note: Deutsche's outlook was published on Nov 28