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Global Data Watch Summary

Core Content

This document provides an overview of global economic trends and policy outlooks for the first quarter of 2025, highlighting key macroeconomic indicators, policy changes, and their potential impacts on growth, inflation, and financial markets. It outlines expectations for various regions, including the United States, Euro area, Japan, emerging markets, and others, and discusses the implications of upcoming data releases and policy decisions.

Main Views and Key Information

Global Economic Outlook

• Global Real GDP Growth: Expected to remain stable, with growth rates projected at 2.7% in 2024 and 2.4% in 2025.
• Inflation Trends: Global core inflation is projected to remain relatively high, with a 3.1% annual rise in 2024 and a modest moderation to 2.8% in 2025.
• Manufacturing Activity: Global manufacturing output is up 2.2% year-over-year through October 2024, with expectations of continued growth in 1H25. However, recent PMI data show mixed signals, with some regions like China and Korea experiencing declines.
• Service Sector Inflation: Divergent trends are expected, with service inflation in the US, UK, and EM excluding China still above 3%, while the Euro area and others are returning to around 2%.

United States

• Job Market: Private payrolls are expected to continue growing, with a focus on the upcoming employment report showing signs of a pickup.
• Inflation: Core CPI is expected to moderate to 0.2% month-over-month in December and 2.8% year-over-year for the quarter.
• Policy Outlook: The incoming Trump administration is expected to push for tax cuts and deregulation to boost growth, but also pose risks through trade policies and immigration restrictions.

Euro Area

• Inflation: Core prices are expected to rise by 0.2% month-over-month in December, slightly above the target but still weak after a sharp decline in November.
• Growth: Growth is expected to remain steady at 0.8% in 2025, with some domestic demand pressures.
• Policy Outlook: The European Central Bank (ECB) is expected to maintain a cautious stance, with potential for further rate hikes.

Japan

• Inflation: The Bank of Japan (BoJ) is expected to implement a rate hike in January, despite uncertainties about the new US administration.
• Economic Outlook: Real GDP growth is projected to be 1.2% in 2025, with the BoJ's stance on monetary policy influencing inflation trends.

China, Hong Kong, and Taiwan

• Manufacturing Activity: China's manufacturing output is expected to grow, but recent PMI data suggest a slowdown, particularly in export-oriented sectors.
• Inflation: Inflation is expected to remain moderate, with core CPI likely to stabilize at 0.7% year-over-year.

Korea

• Growth: Expected to slow, with revised GDP forecasts at 1.3% year-over-year in 2025.
• Policy Outlook: The Bank of Korea (BoK) is likely to cut rates further, with a revised terminal rate forecast at 2.0%.

Türkiye

• Inflation: CPI is expected to fall to 44.4% year-over-year, with further declines anticipated.
• Policy Response: The Central Bank of Türkiye (CBRT) has cut rates by 250bp, signaling confidence in inflation moderation.

Emerging Markets

• Fiscal Challenges: Many emerging markets, including Romania, Brazil, and Mexico, face fiscal pressures and high debt levels.
• Inflation and Growth: Inflation remains high in several regions, with growth expectations varying based on policy and external conditions.

Key Highlights

• Global Manufacturing Output: Shows a temporary increase but is under pressure due to a slowdown in business equipment investment.
• US Policy Outlook: The Trump administration's potential changes in trade and immigration could have mixed effects on global growth and inflation.
• Inflation Trends: Core inflation is expected to remain sticky in many regions, with service inflation more influenced by domestic factors.
• Fiscal Policy Impact: Easy fiscal policy is anticipated to offset some of the negative effects of trade and immigration changes.
• Regional Variations: There are notable differences in economic performance and inflation trends across regions, with some experiencing stronger growth and others facing higher inflation and fiscal risks.

Upcoming Data Releases

• US Jobs and Global PMI Services: Expected to provide clarity on the US job market and global service sector performance.
• EA Core HICP: Likely to show a moderate rise in core inflation for the Euro area.
• Global Manufacturing PMI: Expected to confirm or challenge the narrative of growth and inflation trends.

Conclusion

The document outlines a complex interplay between policy changes and economic performance, with a focus on the potential for growth and inflation to remain elevated in the short term. It emphasizes the importance of upcoming data releases and policy decisions in shaping the economic outlook for 2025, particularly in the context of global uncertainty and regional disparities.