Economic Outlook: what a difference six months can make

Inflation is nearing central bank targets and global trade is showing growth

In our previous Economic Outlook six months ago, we struggled to express much optimism. We’re not an especially pessimistic team of economists, but we were not confident that the economic activity we saw in the USA could be sustained, nor did we think it would be enough of a driver to turn the wheels of the global economy.

Indeed, at the time, there were too many indicators suggesting growth was insecure and standing on shaky foundations. These included the finite nature of consumer pandemic savings, a tight labour market and high borrowing costs impacting manufacturing in particular.

We paused. We knew announcing a soft-landing for the global economy would be premature. However now as we are entering the second half of the year, we can take our fingers off the pause button. The world is beginning to see trade growth. This is modest and at times even cautious growth, but we are seeing signs of growth nonetheless, with the biggest drivers coming from Asia’s emerging economies, the USA, Spain and from global disinflation.

Driver of growth: Asia

Asia’s emerging economies are continuing to drive global growth, with an outlook that is on average stronger than advanced economies. This strength is modest, however, and GDP growth for the EMEs is expected to stay in low gear through the rest of this year and into next year too.

In fact, although the emerging economies of Asia are expected to experience higher growth than any other global region, this will be significantly slower than it has experienced in recent years.

Much of this slowdown will be caused by the cooling of China’s economy, tempered slightly by government fiscal expansion and external demand for goods.

India is the world’s fastest growing emerging market, but even here the pace of growth is slowing. As we outline in our Economic Outlook, we predict GDP growth will slow to 6.3% during 2024, down from last year’s 7.7%.

Driver of growth: USA

The US economy is proving to be more resilient than earlier forecasts, with consumer confidence supporting slow and steady growth. We expect the growth trajectory to continue, although it is likely to slow slightly next year.

The positive outlook for consumer consumption has been supported by very gradual disinflation and modest wage increases. The continuation of elevated interest rates will weigh on the spending of many households, although steady employment rates contribute to the overall positive outlook.

Much of the approach to the trade tariffs introduced during the Trump presidency were retained during the Biden administration. Whether this will change following the presidential election in November remains to be seen.

Driver of growth: Spain

Tourism, a robust labour market and European fiscal support (the Recovery and Resilience Facility) have all helped Spain enjoy the strongest GDP growth of Eurozone nations. At 1.1% this remains fairly modest, albeit stronger than its continental neighbours.

Although 2024 Eurozone growth will be higher than we previously predicted in our last Outlook, it remains fairly small at just 0.8% overall. However, Eurozone growth for 2025 is predicted to be at 1.8%, so recovery is on the cards.

Driver of growth: disinflation

Inflation has been coming down. In many areas it is close to targets set by central banks. In the Eurozone, for example, it is expected to fall below 2% by the end of 2024. Although inflation is stickier elsewhere, including the US, for the most part this is a good news story.

Potential block in road

Although most indicators are pointing towards a brighter horizon, ongoing geopolitical issues could still hinder or even block the growth journey. Primary among these is the Israeli-Palestinian conflict (and the impact this may still have on oil prices) as well as the interruptions to shipping lanes near the Red Sea.

You can read more detail in the Atradius Economic Outlook, researched and written by our team of economists including Dana Bodnar, Theo Smid and myself.

Download our Economic Outlook report