⚡ Will the US Economy Continue to Outperform in 2025?
Macro Mornings // #GlobalGrowth #TradeTensions #MonetaryPolicy
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Steady but Uneven Expansion
Global GDP Outlook: Worldwide GDP is projected to grow by 2.7% in 2025, matching 2024 levels but still below the 3.4% pre-pandemic average recorded from 2015 to 2019.
U.S. Leads the Pack: The U.S. is forecast to expand by 2.5%, significantly higher than the euro area’s 0.8%, marking the third consecutive year of U.S. economic outperformance over other developed economies.
Productivity Momentum: Labor productivity in the U.S. has grown at an annualized 1.7% since 2019, compared to 1.3% in the prior decade, while the euro area’s productivity growth dropped to 0.2% from 0.7% in the same period.
Trade Tensions and Economic Realignments
China’s Tariff Challenges: U.S. tariffs on Chinese goods could rise by an average of 20%, with top rates hitting 60%, dragging China’s 2025 GDP growth to 4.5%, down from the 4.7% forecast in 2024.
Euro Area Trade Headwinds: Trade-related uncertainty could subtract 0.9 percentage points from euro area GDP growth in 2025, more than double the 0.4% impact on global growth.
Emerging Market Boost: Trade shifts away from China may open opportunities for emerging markets, potentially boosting their export volumes by up to 15% in select sectors.
Monetary Adjustments and Inflation Trends
Rate Cuts on the Horizon: The Federal Reserve is expected to reduce rates to a range of 3.25–3.5%, a significant shift from the 4.5–4.75% range today, supporting borrowing and investment.
Inflation Moderation: U.S. core PCE inflation is projected to ease to 2.4% by late 2025, compared to 3.2% in 2024, while euro area core inflation stabilizes at 2%, a marked improvement from 2.7% in 2023.
Bank of Japan’s Divergence: Japan is likely to raise its policy rate to 0.75% by 2025, ending years of near-zero interest rates and signaling stronger domestic growth prospects.
Alessandro
Founder of Macro Mornings
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Disclosure
This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. This material has been prepared for informational purposes only. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.