Global Macro Trends
In the second quarter, global growth is estimated to have remained robust, matching the pace of the first quarter. For the entire year, growth is projected to be around 3.1%, driven by stronger-than-expected U.S. growth, moderate economic activity in the Eurozone, and slower momentum in China. Additionally, a mild deceleration in inflation in the U.S. and Eurozone allowed their central banks to begin lowering key interest rates. As a result, monetary policy is becoming less restrictive, positively impacting economic recovery at a time when it appears to be slowing down.
In Q2 2024, the U.S. economy surprised positively, achieving a growth rate of 3.0% compared to 1.6% in the first quarter (quarterly annualized rate), primarily driven by private consumption. Meanwhile, overall inflation is now at 2.5% (based on August CPI and July PCE) and slightly higher for core inflation, approaching the Fed’s 2% target. The outlook, based on the most recent economic data and leading indicators, remains mostly positive. An exception is the manufacturing sector, where the related leading ISM index continues to indicate moderate contraction. At the same time, there are increasing signs that labor market conditions are gradually becoming less favorable. A mild slowdown in economic activity is our main scenario for the current and next year. We estimate an overall growth rate for 2024 to be around 2% (slightly lower than the consensus estimate).
In the Eurozone, the growth rate for the second quarter was 0.2% on a quarterly basis and 0.6% annually (compared to 0.3% and 0.5% in the first quarter, respectively). Meanwhile, overall inflation decreased to 2.2% in August, with core inflation at 2.8%, moving closer to the ECB’s 2% target. Labor market conditions remain excellent, with the unemployment rate dropping to a historic low in July. However, challenges in the manufacturing sector persist, particularly in Germany, with no significant improvement expected soon, as domestic demand remains restrained. We anticipate that the growth gap between the U.S. and the Eurozone will narrow in the current and especially the next year due to the slowdown in U.S. economic activity and the acceleration expected in the Euro Area in 2025.
In China, the latest economic data and leading indicators confirm the restraint in its growth momentum, mainly due to the intractable problems in the real estate market and weak domestic demand (partly reflected in the practically non-existent inflationary pressures). Positive effects are expected from the implementation of government interventions in the real estate market and the small interest rate cuts announced in recent months. On the other hand, the consequences of increased tariffs and other restrictive measures from the U.S., and to a lesser extent from the EU, will gradually become more apparent.