Global Economics Intelligence executive summary, January 2023

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Despite the year’s high inflation and energy uncertainty, world economic performance in 2022 almost certainly exceeded earlier, more pessimistic expectations. Growth estimates for 2023 and 2024 have also become less dire. Recently upgraded forecasts suggest that the pace of global GDP growth in 2022 was 3.2% (International Monetary Fund, Conference Board). In most analyses, a slowdown of short duration is predicted for 2023, resulting mainly from stagnation in the developed economies, with a rebound in 2024.

The economies of the United States and the eurozone demonstrated resilience in the second half of the year. The US economy expanded at an estimated 2.9% in the fourth quarter and 2.1% in 2022 overall. The eurozone economy avoided a predicted contraction in the fourth quarter, expanding by 0.1% beyond the previous quarter and 3.5% for the year.

From the world’s largest emerging economies, comparatively robust growth is expected for 2023. In India, where GDP expanded 8.7% in fiscal year 2021–22 (March to April), the official GDP growth estimate for fiscal year 2022–23 is 7%. In China, the pace of economic expansion slowed from 8.4% in 2021 to 3% in 2022. The main cause was disruption connected to the “zero-COVID” policy, but weaker global demand and rising geopolitical uncertainty magnified the headwinds. China has since lifted key pandemic restrictions. At the World Economic Forum’s annual meeting in January, Liu He, China’s vice-premier and top economic adviser, welcomed foreign investors, emphasizing that China’s economy was set to improve significantly in 2023. The IMF recently upgraded its growth estimate for China in 2023 to 5.2%, and early economic data are directionally supportive.

Recent global economic data have been mixed, reflecting both improved conditions and persisting downside risks, largely centering on inflation and geopolitical uncertainty. Inflation has begun to slow in both developed and emerging economies. Energy prices have come down, but core inflation readings remain high, and central banks are sustaining a course of policy tightening. The US Federal Reserve implemented a small rate rise on February 1 (one-quarter point), bringing the policy interest rate to 4.5–4.75%. The Fed also signaled that further increases can be expected in 2023. On February 2, the Bank of England lifted its key interest rate three-quarters of a point, to a range of 3.5–4%, the highest it has been in 14 years. The European Central Bank, meanwhile, raised its key refinancing rate by a half point, to 3% (Exhibit 1).

Although energy prices have come down, core inflation readings remain high, and central banks are sustaining a tightening course.

Consumer confidence improved globally and in most surveyed economies, though the prevailing surveyed mood falls well short of optimism. High prices and consumer caution continue to constrain retail sales in surveyed economies.

Amid weaker demand and high input costs, the global purchasing managers’ indexes (PMIs) for both manufacturing and services finished the year in shallow contraction (48.6 and 48.2, respectively). PMI readings for individual economies were likewise contractionary in December, with the notable exception of India, where readings for both manufacturing and services were robust (57.8 and 58.5, respectively). PMI readings in January 2023 mainly show improvement (Exhibit 2).

In January, manufacturing contracted with less severity in most economies; the sector is expanding in India and Russia.

In November, world trade volumes, as measured by the CPB World Trade Monitor, decreased –2.5% from the previous month (when trade also contracted), with lower volumes in all major regions. However, the most recent available comprehensive trade data, the December release of the Container Throughput index, shows a year-end trade revival: the index reached 124.3 (121.9 in November), and both Chinese and European components improved (Exhibit 3).

The Container Throughput Index shows a year-end trade revival, including improvement in both Chinese and European ports.

Unemployment rates in most surveyed economies remain stable and relatively low by country or region: 3.5% in the United States, 3.7% in the United Kingdom, 6.5% in the eurozone, and 8.1% in Brazil.

While producer price indexes have been going down, prices of some commodities, notably industrial and precious metals, have lately increased. The price of copper climbed 10% in the new year, as demand surges from the energy sector. Food-price inflation has moderated but is still historically high.

Inflation expectations implied in the yields of US Treasury products have declined to 2% for the medium and long term, compared with 3.5% in early 2022. In January, the yields on government bonds have been declining. Equity markets in the United States, Europe, and China have also been on an upward trajectory in the new year. The US dollar depreciated in December and January against the euro and the pound sterling (trading at $1.10 and $1.24, respectively, on February 1).

McKinsey’s Global Economics Intelligence (GEI) provides macroeconomic data and analysis of the world economy. Each monthly release includes an executive summary on global critical trends and risks, as well as focused insights on the latest national and regional developments. View the full report for January 2023 here and here. Detailed visualized data for the global economy, with focused reports on selected individual economies, are also provided as PDF downloads on The reports are available for free to email subscribers and through the McKinsey Insights app. To add a name to our subscriber list, click here. GEI is a joint project of McKinsey’s Strategy & Corporate Finance Practice and the McKinsey Global Institute.

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