The economic research office of Mitsubishi UFJ Financial Group (MUFG) issued its 2024 outlook report titled “Five Key Questions for 2024,” in which contributors Henry Cook (senior economist, London), Agron Nicaj (U.S. economist, New York) and Sai Yabuki (Japan economist, Tokyo) explored major global macro themes for the next 12 months.

According to the outlook, 2023 can be summarized as a year of resilience, as advanced economies avoided sharp downturns despite rapid monetary policy tightening. The U.S. economy was a particularly bright light with buoyant domestic demand driving an upswing through the year. The Japanese economy also expanded strongly in the first half of 2023 before losing steam in the second half of the year. It’s been tougher going in Europe, with the euro area economy now teetering close to a mild technical recession against a broader backdrop of stagnation.

This tees up some key questions for the year ahead from a macro perspective, the most important of which relates to the durability of the U.S. expansion. As it stands, a so-called U.S. ‘soft landing’ seems increasingly plausible, although MUFG’s economists are still looking for a cyclical slowdown.

“We expect real GDP growth to weaken in the first half of 2024 but for consumers to have enough strength, bolstered by a strong labor market, to keep consumption growth in positive territory,” Nicaj wrote.

The European economy, starting from a position of relative weakness, may be able to catch up a little ground in the second half of the year. MUFG’s economists are also cautiously optimistic about the outlook for the Japanese economy.

Despite this, MUFG’s economists suspect that markets are currently pricing in too much in the way of rate cuts given a potential U.S. soft landing/no imminent recession, although they do expect easing from the Federal Reserve, European Central Bank and Bank of England this year. Meanwhile, the Bank of Japan is likely to be swimming against the global monetary policy tide, as it will look to raise interest rates back to positive territory.