Asset Management: Monthly Macro Insights - January 2025

In 2024, global growth has remained stable and world trade has been recovering, while price pressures continued to ebb. Investors project that this resilience will continue in 2025, with inflation further converging towards central banks’ targets. However, this outlook masks significant differences across sectors and countries, and is surrounded by important uncertainties.

Downside risks in the US…

The global economy has proved resilient in the last year, but is in large part explained by the US which experienced the fastest GDP growth in all G7 countries in the past two years and this exceptionalism would persist this year according to the latest OECD economic projections. Yet, while the recent pattern of unexpected US resilience could continue, risks are nonetheless skewed to the downside.

… and Europe

Economic growth in Europe has been mediocre in 2024, as GDP probably expanded less than 1 per cent in the UK and the Eurozone. Looking ahead, recent indicators suggest ongoing weakness with the PMI business confidence index, hovering around the neutral 50-threshold at the end of 2024, thus flagging downside risks to investors’ sanguine forecasts.

China’s murky outlook

Since the end of September, China’s growth has shown some tentative signs of steadying due to the recent policy push. For instance, the decline in house prices across major cities slowed in November for the first time since early 2024, although retail sales growth unexpectedly weakened. Inflation decelerated in November to a mere 0.2 per cent from 0.3 per cent, a sign that the domestic economy remains fragile. The government is expected to unleash more measures, but the extent of the support will likely be adjusted depending on the degree of the external drag.