The global economy is slowing. Elevated energy and food costs, declining real incomes and China’s rolling COVID lockdowns are all taking a toll on activity. Confidence surveys and leading indicators like the purchasing managers indices (PMI) are moderating. Markets are on edge as stubbornly high inflation is forcing central banks to tighten aggressively, despite signs of slowing growth.

One silver lining so far: There are no clear signs of a wage-price spiral in major economies. We are hopeful that inflationary pressures will wane, but the descent will be gradual owing to lasting disruptions in commodity markets.

Against this gloomy backdrop, we have downgraded our growth expectations for western advanced economies. Our outlook does not feature a recession in major markets, but the likelihood of that outcome has risen.

This month’s edition offers a deep dive into the eurozone economy, which faces the biggest risk of stagflation.