The United States economy is growing more slowly than expected and inflation remains stubbornly high around the world, two developments that pose risks to the global economy, the International Monetary Fund said on Tuesday.
The I.M.F.’s most recent World Economic Outlook report underscored the lingering vulnerabilities that could derail a so-called soft landing for the world economy — one in which a global recession is avoided despite aggressive efforts by central banks to tame rapid inflation by making it more expensive to borrow money.
The new report said the I.M.F. still expected growth in global output to hold steady at 3.2 percent in 2024. That would be unchanged from its April projections. The fund also expected growth to be slightly higher next year, at 3.3 percent. However, the closely watched projections included several caveats and warned that the global economy was in a “sticky spot.”
Most notable were signs of weakness in the United States, which has helped power the global recovery from the pandemic. The I.M.F. now expects the United States economy to grow more slowly than it did previously as a result of weaker consumer spending and a softening job market.
The report forecast that U.S. economic growth would increase to 2.6 percent in 2024 from 2.5 percent in 2023, a slight downgrade from its previous projection of 2.7 percent. “The United States shows increasing signs of cooling, especially in the labor market, after a strong 2023,” Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, said in an essay that accompanied the report.
Global inflation is still expected to ease to 5.9 percent this year from 6.7 percent in 2023. But the I.M.F. noted that prices for services remained hot. That could force central banks — which have raised interest rates to their highest levels in years — to keep borrowing costs elevated longer, putting growth at risk for both advanced and developing economies.
“Unless goods inflation declines further, rising services prices and wages may keep overall inflation higher than desired,” Mr. Gourinchas said. “Even absent further shocks, this is a significant risk to the soft-landing scenario.”
Recent inflation reports have suggested that price increases in the United States have been moderating, leading investors to speculate that the Federal Reserve could begin lowering borrowing costs in September. Jerome H. Powell, the chair of the Federal Reserve, said on Monday that the data had added to central bankers’ confidence that price increases were slowing, but avoided giving a clear signal about when officials would have enough confidence to cut interest rates.
Despite some indications of sluggishness in the United States, the I.M.F. said output in the euro area, China and India was looking stronger. The fund described Asia’s emerging market economies as the “main engine for the global economy” and said growth in China and India accounted for nearly half of global growth.
Although the I.M.F. upgraded its outlook for China, government statistics released this week showed that economic growth slumped through the spring after a strong start this year as a real estate crash caused consumers to spend more cautiously.
The I.M.F. projects China’s economy to grow at a rate of 5 percent this year, slower than the 6.1 percent rate that China’s statistical bureau estimates.
The fund also continued to express concerns about mounting debt burdens facing economies around the world, and it pointed to political uncertainty and rising protectionism as economic headwinds. The United States has increasingly been a country of concern on those fronts, as President Biden and former President Donald J. Trump have both embraced tariffs as central to their economic pitches for a return to the White House while failing to articulate realistic proposals to reduce the national debt.
“The potential for significant swings in economic policy as a result of elections this year, with negative spillovers to the rest of the world, has increased the uncertainty,” the report said. “Trade tariffs, alongside a scaling up of industrial policies worldwide, can generate damaging cross‐border spillovers, as well as trigger retaliation, resulting in a costly race to the bottom.”