Global Contraction Regime Starting

The economy is entering a global contraction regime for the first time since February 2020, says Alessio de Longis, a senior portfolio manager with Invesco Investment Solutions. The contraction regime was led by declines in the U.S. and the Eurozone. Positive momentum in Japan has dissipated, while the UK, China, and the rest of emerging markets have seen some improvements over the past month. It anticipates deteriorating growth below its long-term trend as both the U.S. and the aggregate developed ex-U.S. LEI declined for the third consecutive month and moved below their long-term trend. Contributions to this decline were broad based across variables and economic sectors, namely business surveys, housing indicators, industrial orders, consumer sentiment, and labour market conditions in manufacturing. Noticeably, consumer sentiment remains at recessionary levels, while business and housing conditions are declining from cyclical peaks.