The IMF has revised down by 0.1% percentage points its forecast for eurozone 2024 economic growth to 0.8% amid persistent manufacturing weakness in countries such as Germany and Italy. However, the US forecast has been revised up 0.2pp to 2.8% amid stronger consumption and non-residential investment, Kallanish notes.
Global growth is projected at 3.2% in 2024, unchanged from the previous outlook.
Whereas Italy’s domestic demand is expected to benefit from the EU-financed National Recovery and Resilience Plan, Germany is experiencing strain from fiscal consolidation and a sharp decline in real estate prices, the institute says in its October World Economic Outlook update.
In 2025, eurozone growth is projected to accelerate to 1.2%, helped by stronger domestic demand. Rising real wages are expected to boost consumption, and a gradual loosening of monetary policy is expected to support investment, IMF notes.
The resilience of US consumption is largely the result of robust increases in real wages – especially among lower-income households – and wealth effects, IMF says. US growth is anticipated to slow to 2.2% in 2025 as fiscal policy is gradually tightened and a cooling labour market slows consumption.
Japan’s growth outlook for 2024 has been revised down 0.4pp to 0.3%, reflecting a temporary supply disruption in the car industry. However, the UK’s growth has been revised up 0.4pp to 1.1%, and is expected to accelerate to 1.5% in 2025 as falling inflation and interest rates stimulate domestic demand.
The IMF points out that relative to pre-pandemic trends, goods prices remain elevated compared with those for services, a lingering effect of the pandemic and its aftermath, which saw strong demand for goods alongside supply constraints. “Consequently, behind stable growth figures, a global shift from goods to services consumption is underway. This rebalancing is tending to boost activity in the services sector in advanced and emerging markets but is dampening manufacturing,” it notes.
“Manufacturing production is also increasingly shifting toward emerging market economies – in particular, China and India – as advanced economies lose competitiveness,” it concludes.
Adam Smith Poland
