Global Macro Trends
USA: On a marginal deceleration path
Eurozone: Almost imperceptible improvement
China: Economic recovery weakness
Global Growth remained quite firm in Q1 2024 following Euro Area’s recovery after a prolonged period of stagnation, meanwhile China’s growth was stronger than anticipated. On the other hand, US growth decelerated more than expected in Q1 2024. Despite trending down, Global Inflation remained sticky and uneven resulting in the Fed raising its inflation forecast for the year and ECB for 2024 and 2025. US inflation surprised negatively in Q1 but came weaker than expected in May slowing moderately from the prior month. In contrast, EA inflation came down faster than expected in Q1 and reaccelerated in May. Overall, for the US & Eurozone, we estimate that inflation will converge towards central banks’ 2% target in early 2025. Finally, in China, inflationary pressures remain almost non-existent.
The US economy showed less momentum than expected in Q1 2024, with the economy growing at a slower rate of 1.4% compared to 3.4% in Q4 2023 (SAAR, QoQ%). The main drivers of the increase were fixed investments together with private consumption, with the latter however moderating significantly compared to the previous quarter. Spending on services (+2.8%) more than offset the decline in spending on goods (-2.3%), a trend which is also echoed in recent leading manufacturing and services indices. Recent economic surprises and various leading indicators point to a deceleration of economic activity, while at the same time conditions in the labor market are gradually becoming less favorable. Our baseline scenario calls for a mild slowdown in economic activity both in 2024 and 2025. Our full-year growth estimate for 2024 remains between 1.5% and 2% (slightly below the consensus estimate).
In the Eurozone, latest economic data and leading indicators point to a slow but growing economy. The labor market remains healthy and is expected to have a positive effect on growth, and consumer savings from the Covid period continue to be the backbone of growth in the Eurozone, translating into higher levels of consumer confidence. We estimate that the growth gap between the U.S. and the EA will shrink further due to the expected slowdown of economic activity in the US and the anticipated acceleration in the Euro Area in 2024-2025.
China’s growth momentum seems to be moderating in the medium term, as the consequences of higher tariffs and other restrictive measures by the US primarily and secondarily by the EU will become apparent. At the same time, any solutions to the problems faced by the real estate market will take time, money and operational flexibility, while internal demand does not seem to be growing at a rate capable of offsetting the expected impact from higher tariffs & China’s real estate prolonged downturn.