Hazard of a ‘hard landing’ on the horizon

The US economy is at an inflection point. GDP growth significantly undershot expectations in Q1 at 1.6% annualized versus an anticipated 2.5%. Despite the Federal Reserve’s commitment to monetary tightening, inflation remains more than a percentage point above target. Over the course of 2023, robust credit-led consumer spending and a seemingly indefatigable labor market had propelled the US economy, but those tailwinds are evidently fading.

This makes a ‘hard landing’, signs of which had been receding, more likely than it was toward the end of last year. The International Monetary Fund (IMF) revised its 2024 growth estimate upward to 2.7% in April, a significant increase from the 2.1% forecast made in January, but these projections may be lagging behind the economic reality, given that the latest and less positive official data was published by US Department of Commerce only on 25 April.

M&A endurance

Latin America & the Caribbean is expected to experience a slight slowdown in growth, from 2.7% to 2.5% in 2024, excluding Argentina and Venezuela. Despite this, the region has shown resilience, with an upward revision of 0.2 percentage points for 2024. Monetary conditions in the region have been easing for some time now. Brazil, for example, began trimming its base interest rate as early as August last year.

Brazil’s growth is projected to moderate from 2.9% in 2023 to 2.2% in 2024, and then stabilize at 2.1% in 2025. Meanwhile, Mexico’s growth is forecast to slow from 3.2% in 2023 to 2.4% in 2024, and slide further to 1.4% in 2025. In short, economic expansion across the Americas is abating in the face of inflationary headwinds, and yet the region’s M&A markets are powering on—aggregate deal value bottomed out in Q1 2023 and has broadly ascended since, despite some slight softening at the start of 2024.

Published in association with Datasite, Deal Drivers Americas provides an in-depth review of M&A activity in Q1 2024, as well as an outlook for the year ahead.

The report is also available on datasite.com.