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Shaping Section | 2
Global Economics Intelligence executive summary, January 2024
By Jeffrey Condon et al., | McKinsey & Company | February 21, 2024
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It’s a messy picture out there, with data pointing to an uncertain global economic outlook this year. There are plenty of positives, such as strong growth in services, GDP growth in several surveyed economies, and stability across multiple indicators, including unemployment. However, this is juxtaposed with a subdued manufacturing environment, a decline in global trade flows, renewed uncertainties about supply chains (especially concerns over shipping via both the Red Sea and the Panama Canal), and lingering inflation.
The January 2024 World Economic Outlook Update from the International Monetary Fund (IMF) describes the global economy as “surprisingly resilient” in a modest upgrade to its October projections: growth is now projected at 3.1% in 2024 and 3.2% in 2025.
Meanwhile, although OECD composite leading indicators point toward a rebound across most developed and emerging economies (with China and the UK as the biggest “rebounders”), consumer confidence looks to be trending down across surveyed economies—although there has been no data since November’s OECD data indicated a decline in consumer confidence across most surveyed economies. Looking ahead, inflation expectations have stabilized between 2.0% and 2.3% for both the medium and long term.
In the US, initial estimates indicate real GDP growth of 2.5% for 2023—beating almost all expectations. January 2024 settled in with upbeat consumer sentiment, inflation at 3.4%, and a growing equity market. A somewhat more positive GDP story saw China reporting growth of 5.2% in 2023 to reach $17.7 trillion, with consumption contributing more than 80.0% of the growth. India, meanwhile, is targeting growth of 7% in 2024–25. Russia’s wartime economy is estimated to see a rebound in economic activity for the whole year of about 2.7% to 3.0%. Better-than-expected performance was most likely driven by the resilience of domestic demand, stimulated by government spending and wage growth prompted by labor shortages.
Manufacturing and services continue their divergent paths: the global purchasing managers’ index (PMI) for manufacturing indicated contraction for the 16th successive month (ticking down to 49.0 in December from 49.3 in November), whereas the comparable index for services indicates that services expansion has maintained momentum at 51.6. Looking at manufacturing on a country and regional level, we see that India (54.9 in December) and Russia (54.6) stood out in terms of manufacturing PMI performance, while China remained steady (50.8 in December) and other surveyed countries were lackluster.
Unemployment remains either steady or on a downward trend. US unemployment in December was unchanged at 3.7% (3.5% in January 2020). The UK unemployment rate for August to October 2023 was largely unchanged from the previous quarter at 4.2%. China’s surveyed urban unemployment rate was reported at 5.2% in December 2023, down 0.4 percentage points since 2022. The adjusted youth unemployment rate, which excludes students, stood at 14.9% in December 2023. India’s unemployment rate fell to 8.7% in December from 9.2% in November. Brazil’s three-month moving average unemployment measure continued downward to 7.5% in November (7.6% in October), its lowest since 2015. Russia’s unemployment rate was stable at a record-low level, below 3%.
The US, India, and Brazil were the standouts on the equity markets. In December, the S&P 500 was up 4.4%, bringing its one-year return to 24.2%; the Dow Jones rose 4.8% for the month and was up 13.7% in 2023. In India, both the Nifty and the Sensex rose: the Nifty had climbed 3.2% and the Sensex 2.7% as of January 22, 2024 (compared with December 12, 2023). In December, Brazil’s Bovespa equities index added 3.1% in value.
For November, exports fell in Russia and the US but were up in China; imports decreased in China and the US. US exports were $253.7 billion in November, $4.8 billion lower than October, and November imports reached $316.9 billion, down $6.1 billion from October. November’s Container Throughput Index registered a continued fall for northern Europe, alongside a slight weakening for China, but the overall index was up to 124.5, from 123.7 (revised) the previous month. Currently, world trade is largely being driven by imports in emerging economies.
3 key takeaways from the article
- It’s a messy picture out there, with data pointing to an uncertain global economic outlook this year. There are plenty of positives, such as strong growth in services, GDP growth in several surveyed economies, and stability across multiple indicators, including unemployment. However, this is juxtaposed with a subdued manufacturing environment, a decline in global trade flows, renewed uncertainties about supply chains (especially concerns over shipping via both the Red Sea and the Panama Canal), and lingering inflation.
- Although OECD composite leading indicators point toward a rebound across most developed and emerging economies (with China and the UK as the biggest “rebounders”), consumer confidence looks to be trending down across surveyed economies. January was 16th successive month for manufacturing and services continue their divergent paths i.e., contraction and expansion respectively.
- Unemployment remains either steady or on a downward trend. The US, India, and Brazil were the standouts on the equity markets. Currently, world trade is largely being driven by imports in emerging economies.
(Copyright lies with the publisher)
Topics: Global Economy, Inflation, Interest Rate, Consumer Confidence, Employment, Equity Market
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