Global bond yields have risen significantly in recent months as US economic growth has picked up, supported by strong consumer spending and job creation.

The rise in yields in the US and Europe is despite signals from central banks that policy interest rates are approaching peaks and clear evidence that monetary tightening to date is now weighing on credit growth, as highlighted in Fitch’s latest ‘20/20 Vision’ chart pack.

US Gross Domestic Product rose by 1.2% in the third quarter of 2023 (4.9% annualised), a pick-up from 0.5% in 2Q23 and faster than the 0.4% forecast in Fitch’s September 2023 ‘Global Economic Outlook’ (GEO).

Consumer spending accelerated, despite a fall in household disposable income, with government spending and an inventory build-up also contributing significantly to growth.

China’s GDP growth also exceeded expectations in quarter 3 2023 at 4.9% year-on-year compared to a forecast of 4.0% in the GEO. The recovery in consumer spending regained some momentum in 3Q23 despite property activity continuing to decline sharply.

The chart pack also highlights marked weakness in global manufacturing activity, with slowing industrial production and softness in Manufacturing Purchasing Managers’ Indices, particularly in Europe where PMI survey balances remain well below the stable benchmark of 50. Bank lending to the private sector is also slowing sharply in the US, eurozone, and UK in response to monetary policy tightening.

Fitch's bi-monthly ‘20/20 Vision’ chart pack covers the 20 major economies (the Fitch20) that are the focus of the Fitch Economics team's global macro analysis, and plots five years of high-frequency economic data for 20 variables, with consistent coverage across each country.