Overview

• A feature of the global economy in 2024 has been the strength of the US economy. Early data for Q4 point to further solid growth to end the year, in contrast to disappointing November activity data for China. US strength is also evident in share markets, with US equity prices outperforming other markets.
• Western Europe, which basically treaded water over 2023, has seen growth pick up this year, and to a lesser extent, this was also true for Canada. In the case of Japan, after a fall in GDP in Q1, it has since rebounded strongly. A concern is that there has been a loss of momentum in Western Europe in recent months.
• There has been minimal easing in advanced economy core inflation since April 2024. This creates some uncertainty around the pace of policy easing, although activity concerns are also a factor in some economies.
• The EM composite PMI edged up in November, in part due to a lift in China’s manufacturing PMI, driven by export demand. However, the strength of export growth is adding to trade frictions while weak domestic demand continues to constrain overall growth. India’s economy has been growing strongly, but Q3 growth disappointed and we have marked down our forecasts as a result.
• We expect growth in the global economy to remain subdued out to 2026. Growth is expected to ease to 3.0% by 2026, in part due to a negative impact from expected US import tariff increases. This includes some moderation in US growth, a further weakening in China’s growth rate, while growth in some countries should stabilise, assisted by looser monetary policy.
• There is considerable uncertainty around the policy changes to be implemented next year by the new US administration. Even where the policy direction is clear in some cases (higher tariffs, less migration) the timing and extent is uncertain. Last month we marked down our global forecasts to allow for an overall negative impact from higher tariffs. Tariffs threatened to come into place on Trump’s first day in office are already challenging our assumptions about the scale and timing of trade restrictions.

For further details, please see The Forward View Global (December 2024)