What We Saw In The Global Economy This Year

What We Saw In The Global Economy This Year

about 1 year ago2 mins

The last few years have felt like a living social experiment, and this one was enough to convince even the most steadfast skeptics.

What does this mean?

Cast your mind back to the start of the year: supply chains were already bruised from the pandemic, then war in Europe battered them beyond belief. The resulting shortages lit a fire under food and energy prices, which helped ignite prices around the globe. And that’s a big reason why some economists reckon global inflation will end the year at a staggering 9.5%.

Inflation

Luckily for us, central banks swooped in to save the day. Unluckily for us, they had to use aggressive interest rate hikes to fight inflation. Problem is, hikes dent the economy by making it more expensive to borrow and spend. That might be why economists widely expect the global economy to grow just 3.2% this year compared to 2021. Huh, we thought reminiscing would be fun.

Economic growth forecast
Source: IMF

Why should I care?

Zooming in: Land that job, quick.

The job market managed to hold up throughout all the drama. With around two vacancies for every unemployed head in the US, the onus was on employers to raise wages to win over workers. Even that wasn’t enough: “real wages” – adjusted for inflation – in the US were still almost 2% lower in November than the year before. But now that the economy’s slowing down, and layoffs are cropping up everywhere (we’re watching, Big Tech), 2023 could be a whole different beast.

Real wages US

The bigger picture: Tough love.

The Federal Reserve, Bank of England, and European Central Bank fought inflation with gusto this year – gusto being jumbo rate hikes, of course. And despite choking economies in the process, recent data shows their persistence might’ve knocked the worst of the wind out of inflation’s sails. Central banks have eased up a little now, but time will tell if their well-intended efforts have pushed economies into full-blown recessions.

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