Take Two: IMF forecasts “stable yet underwhelming” growth; Eurozone activity remains lacklustre
- 28 October 2024 (3 min read)
What do you need to know?
Global growth is expected to remain “stable yet underwhelming” at 3.2% in 2024 and 2025, according to the International Monetary Fund's (IMF) World Economic Outlook. It forecast 3.1% growth five years from now – “mediocre” compared with the pre-pandemic average, as factors including ageing populations and weak productivity hold back potential growth in many economies. However, the IMF revised up its US GDP growth forecast to 2.8% for 2024 - on the back of stronger consumption and non-residential investment - and 2.2% for 2025, from the 2.6% and 1.9% respectively it predicted in July. AXA IM expects global growth to reach 3.2% in 2024 and 3.1% in 2025.
Around the world
Eurozone business activity continued to stall in October, as the manufacturing sector shrank, albeit at a softer pace, while services activity expanded, according to the bloc’s flash Purchasing Managers’ Index (PMI). The composite reading, including both manufacturing and services data, edged up to 49.7 from 49.6 in September – a figure below 50 indicates contraction. The US composite PMI rose to 54.3 in October from 54.0, with growth driven by the services sector as manufacturing output continued to contract. Japan’s composite PMI fell to 49.4 from 52.0, the first time it has moved below the 50 threshold since June.
Figure in focus: 3.75%
The Bank of Canada (BoC) lowered its benchmark interest rate by a bumper 50 basis points (bp) at its policy meeting - following the Federal Reserve’s lead, and matching market expectations. This marks its fourth consecutive cut and takes rates to 3.75%. The move came after Canada’s inflation fell below the central bank’s 2% target, easing to 1.6% in September. BoC governor Tiff Macklem said there was a “clear consensus” for the larger cut, and that policymakers will continue to lower rates should the economy continue developing as expected. AXA IM expects the BoC to revert to a 25bp cut at its next meeting.
Words of wisdom
Impact investing: An investment approach that seeks to generate outcomes with positive social and environmental impact while aiming to meet investors’ financial objectives. Some $1.57trn in impact investing assets are currently managed by nearly 4,000 organisations worldwide, according to the Global Impact Investing Network (GIIN). That represents a 120% increase on the 2020 market size estimate of $715bn. The report showed that pension funds and insurance companies now account for 48% of global impact assets under management. Momentum in the impact investing sector is accelerating, the GIIN said, though further growth in capital allocation is needed “to mitigate the worst effects of climate change and global inequality”.
What’s coming up?
On Tuesday, Japan issues unemployment data for September while on Wednesday estimates for third quarter (Q3) GDP growth in the Eurozone and US are published. On Thursday the Bank of Japan meets to decide on monetary policy; in September it retained its short-term benchmark rate at 0.25%, its highest level since 2008. Thursday also sees the release of flash Eurozone inflation data. On Friday the US updates markets with its latest job numbers while final October manufacturing PMIs for the UK, US, Japan and China are also reported.
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