Global economy: shaking off shocks

The global economy is starting to shake off the shocks that have rocked macroeconomic conditions and growth over the past several years. But a return to stability is far from complete or certain.

Global growth remains overly reliant on consumer spending and service sectors. Interest rate cuts have been slow to materialise in many developed economies, despite the retreat in inflation. The recovery in industrial production and rotation to investment growth has yet to pick up momentum. Furthermore, risks are numerous, skewed to the downside and could prove disruptive at any time.

We explore these themes and more in our latest quarterly Global economic outlook. Read on for a few selected highlights.

Global GDP gets an upgrade

In our Q3 outlook, we forecast global GDP to grow by 2.7% in 2024before accelerating to 3.0% in 2025.

The delay to interest rate cuts in major economies has pushed back the rotation into investment and manufacturing, which is anticipated to support industrial sectors. Therefore, our global industrial production (IP) has been revised down.

China: policy support will help the sluggish growth in investment and consumption

Our forecast for China in 2024 has been adjusted to 4.8% from 4.7%. Soft growth in Q2 prompted a 10-basis-point interest rate cut and the Chinese government to issue a detailed subsidy plan.

We believe these measures will help the sluggish growth in investment and consumption in the second half of 2024.

India: economic momentum persists

India registered much stronger GDP growth in fiscal year (FY) 2023-2024 than previously expected and the momentum has carried on in the current fiscal year. Government-led capital expenditure will continue, although economic growth will moderate to 6.9% in FY 2024-2025.

With Modi remaining as India’s Prime Minister for the third consecutive term, we expect the government to continue to support infrastructure, affordable housing and the manufacturing sector.

US: resilience continues – for now

The US economy remained resilient and accelerated in Q2, though we don’t expect that to last. Momentum will fade from consumption and services with easing wage growth, a tick up in unemployment and increases in the savings rate. The recovery in industrial production has stalled on the delay to rate cuts.

For a look at how Trump returning to the White House could impact the outlook, visit the store to read the full report.

Mixed picture across Europe

Problems persist for developed European economies – weak productivity, strained public finances and demographic challenges are entrenched. On a positive note, however, Europe is moving ahead with interest rate cuts amid moderating inflation.

The UK and Germany sprung from recession in Q1. Strong services and household expenditure underpins an upgrade to our outlook for the UK. However, Germany’s economy contracted again in Q2, putting it on the verge of another technical recession – its industrial slump is a key factor.

What to watch: geopolitical tensions, conflict escalation, tariff wars and AI

While risks remain skewed to the downside, the good news is that the global economy has consistently surprised to the upside in the past 18 months.

Non-macroeconomic risks are the biggest threats: geopolitical tensions, conflict escalation and tariff wars are the most concerning. Over the longer term, structural drivers like the adoption of artificial intelligence (AI) could provide upside to our outlook – specifically its potential to lift productivity improvements above current expectations.

Visit the store to read our latest Global economic outlook in full.