Consistent Earnings Growth and Digital Engagement
TD Economics Update 110
Global Outlook: Weakening global economy to unfold in 2023
TD
■ Elevated inflation, climbing rates, energy crises, and the war in Ukraine continue to weigh on the global
economic outlook. Softening goods demand will allow manufacturers to play catch-up in 2023, which we
should see ultimately trickle-down into consumer prices.
■ In Europe, the energy crisis is fuelling inflation. Recent recoveries in natural gas storage should help
avoid the worst outcome, but the likelihood of recession continues to erode sentiment. The ECB raised its
policy rates by 75 basis points in October 2022, the third hike in a row.
■ The impact of the war on North America has been most apparent in the inflation data. Higher food and
energy prices had helped push headline inflation to record highs. The retreat of commodity prices from
their 2022 peaks has helped see headline inflation start to trend lower.
U.S. Outlook: Inflated Third Quarter Growth; Inflation and labor supply are challenges
■ After contracting for the first half of 2022, the U.S. economy expanded by 2.6% (ann.) in Q3 2022 thanks
to an unsustainable surge in net exports. Underlying demand in the domestic economy was flat on the
quarter, maintaining a deceleration trend since the start of the year. Weakness in rresidential investment
has weighed on heavily on economic growth, as higher borrowing costs cool housing.
■ The labor market has remained tight by historical standards, keeping wage growth healthy. But there are
early signs that demand for labour is cooling.
Canada Outlook: Growth slowing, housing market cooling and a tight labor market
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The Canadian economy has decelerated sharply in the second half of the year, growing only 0.1% month-
on-month in August 2022. Higher borrowing costs have cooled the housing market and are likely to weigh
on consumer spending going forward.
■ The job market has remained tight, with employment reversing the prior months' weakness in October.
Labour shortages and elevated job vacancies continue to put pressure on wage growth.
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