Economic Research: Global Economic Outlook Q4 2024: So Far, So Smooth--Can It Last?

Macro developments in the biggest three economies remain on different paths (see chart 1). The U.S. continues to outperform with growth above potential despite relatively high policy and market rates. The eurozone economy responded in more typical fashion to higher rates, with a manufacturing recession (centered in Germany); a slow recovery has begun. Chinese growth continues to struggle, reflecting property market woes. These are holding down confidence and spending, putting the 2024 growth target of 5% in danger. Elsewhere, large domestic economies are doing well, and global trade outside of the booming tech sector is subdued. The performance of services and manufacturing sectors continues to diverge. This has occurred in most economies despite diverse macro developments. Services spending has been

...- The global policy rate easing cycle is now in full swing following a 50 basis point cut by the U.S. Federal Reserve in mid-September; this creates space for a swath of central banks to follow suit, particularly in emerging markets. - Economies remain more resilient than we had expected, but outcomes are diverging across the main regions. The U.S. is slowing, the eurozone is recovering, and China faces property-related headwinds. - Global GDP growth remains subdued. We are forecasting 3.2 expansion in 2024, and 3.1% in 2025. The bright spots are economies with strong domestic demand or exposure to the global tech cycle. - The risks to our baseline remain on the downside. These include sharply lower labor demand and a spike in bond yields and geopolitical risks; terminal policy rates (and r*'s) remain key unknowns. Macro developments in the biggest three economies remain on different paths (see chart 1). The U.S. continues to outperform with growth above potential despite relatively high...

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