Global Data Watch Zen and the art of rate recalibration-110413409

Global Economic Research20 September 2024J P M O R G A Nwww.jpmorganmarkets.comContentsUS: Reaching U* before r*13Checking in on the German patient17South Africa: A fiscal windfall from pension reform21 Global Economic Outlook Summary4Global Central Bank Watch6Economic Activity Tracking8Selected recent research from J.P. Morgan Economics10J.P. Morgan Market Watch11 Data Watches United States23 Focus: GDP annual revision and the GDI shortfall34Euro area35Japan40Canada43Mexico45Brazil47Argentina49Andeans51United Kingdom53Sweden and Norway56Emerging Europe58South Africa62Australia and New Zealand64China, Hong Kong, and Taiwan66Korea70ASEAN72India76 Regional Data Calendars78Economic and Policy ResearchBruce Kasman(1-212) 834-5515bruce.c.kasman@jpmorgan.comJPMorgan Chase Bank NAJoseph Lupton(1-212) 834-5735joseph.p.lupton@jpmorgan.comJPMorgan Chase Bank NANora Szentivanyi(44-20) 7134-7544nora.szentivanyi@jpmorgan.comJ.P. Morgan Securities plcManaging EditorMalcolm Barr(44-20) 7134-8326malcolm.barr@jpmorgan.comJ.P. Morgan Securities plcGlobal Data Watch•Fed moves big, while other central banks maintain gradualism guidance•EM easing supported by drops in dollar and global bond yields •China weak but better news on global consumer and US capex •Next week: DM Flash PMI down; RBA on hold; Riksbank, Banxico easeZen and the art of rate recalibrationThe guidance generated by central banks over the past two weeks reinforces our views around the near-term path of policy rates. The Fed confirmed a material shift in its perception of risk, delivering on our expectation of a 50bp ease and guidance toward a roughly 100bp step down in rates by year-end. While FOMC growth and inflation projections were not materially altered, Chair Powell justified the move as a “recalibration” consistent with their updated assessment that they “now see the risks to achieving our employment and inflation goals as roughly in balance.” The US is unique in delivering substantial labor market easing this year that includes a worrisome recent moderation in labor demand and continued positive supply-side performance. The absence of these developments elsewhere, combined with still sticky inflation, does not warrant a similar recalibration. This message was consistent across other DM central banks this month, and we expect similar cautious guidance to come from the Riksbank and RBA next week. Macroeconomic developments are prompting broad EM policy rate easing, but an interesting degree of near-term differentiation has emerged, as political and financial market pressures vary. This week saw a mix of hikes (Brazil), cuts (Indonesia, South Africa), and holds (Türkiye, Taiwan). September meetings provide more clarity on near-term policy rate paths, but we emphasize caution in extrapolating the latest guidance into next year. Central banks will recalibrate if realized outcomes surprise and we stand at a notable juncture: a tightly packed consensus looking for a Goldilocks scenario of susta