The International Monetary Fund (IMF) confirmed what we feared: the world economy is on the verge of recession. According to the international organization, the unprecedented accumulation of risk factors (prolonged inflation, disruption of supply chains, more restrictive monetary policies, sharp drop in demand, etc.) will precipitate at least a third of the countries into a phase of recession.
The IMF estimates that French growth in 2023 should be 0.7% ( once morest an official government forecast of 1%). Obviously, this forecast will be revised as economic data falls.
With regard to activity indicators for the manufacturing and services sectors (PMI indicators) and confidence indicators (business climate in particular), we strongly doubt that France will be able to avoid a recession. For companies, this means adapting to this new situation, in particular by adapting their currency hedging policy.
Unfortunately, there is no improvement on the inflation front. The harmonized consumer price index (which allows comparisons to be made between European countries) reached a new record at 10.9% in annual variation in September in Germany. Economists predict that the peak of inflation should be around 12-13% across the Rhine.
To UNITED STATES, inflation is still volatile, with a producer price index which reached 8.5% in annual variation in September ( once morest a consensus of 8.4%). The main areas of increase are energy (+19.8%), food (+11.2%) and transport, vehicles and medical devices (+6.6%).
These figures validate the scenario of a 75 basis point hike in the key rate by the Federal Reserve (Fed) next month. There is no choice but to continue the process of tightening financial conditions. Unlike other countries, the United States should avoid recession next year.
This is a definite advantage from the point of view of monetary policy. This gives the Fed a bigger window of opportunity to raise its rates as much as necessary so that inflation returns to more sustainable levels.
Finally, the energy crisis is still a headache for Europeans. Fears regarding electricity supplies during the winter remain, which weighs on inflation.
At Mondial Change, we are convinced that the US economy will do much better than the European economy in the months to come. This is a fundamental element that should continue to support the US dollar. In times of severe crisis, investors always react in the same way: they take refuge in the most liquid market on the planet, that is to say the United States.
This happened in 2000 (internet crisis), in 2007-08 (subprime crisis), in 2012 (European sovereign debt crisis). This will also be the case in 2023.