Global growth is expected to remain stable and slow into next year, according to the International Monetary Fund (IMF). Its World Economic Outlook report, released in October, predicts global annual real GDP growth to be 3.2% in both 2024 and 2025, rising to 3.1% in five years’ time, a performance it describes as mediocre compared with the prepandemic average.
Unsurprisingly, forecasts for 2024 and 2025 see emerging markets and developing economies growing fastest at 4.2% across both years, while the advanced economies collectively are expected to grow 1.8% annually. The US is anticipated to grow at an above-average rate of 2.8% this year and in 2025. The UK is expected to outshine the eurozone, with growth of 1.1% and 1.5%, compared with 0.8% and 1.2% over the two years.
India (with expected growth of 7.0% in 2024 and 6.5% in 2025) and China (4.8% in 2024 and 4.5% in 2025) are expected to continue to grow much faster than other regions, with emerging and developing Asia collectively expanding at 5.3% in 2024 and 5.0% in 2025.
The report identifies persistent structural challenges, including an aging population and low productivity, as factors hindering growth in many economies. It also emphasizes the potential risks to the global economy posed by sudden financial-market volatility, commodity price spikes amid ongoing geopolitical tensions, concerns about China’s real estate sector, and the escalation of protectionist trade policies.
Amid various threats to the global economy, the IMF advocates for a policy pivot, transitioning from monetary to fiscal tightening as inflation nears central banks’ target levels (Exhibit 1). Moreover, the report emphasizes that promoting structural reforms to enhance long-term growth and expediting the green transition remain essential priorities.
In recent weeks, China has announced multiple stimulus policies as it seeks to combat deflation within the economy and meet annual growth targets. These measures address various dimensions, such as macroeconomic policy, stabilizing the real estate market, boosting capital markets, and supporting industry and corporate sectors by attracting investment. Policies include reducing the reserve requirement ratio by 0.5 percentage points, cutting the average mortgage rate by 0.5 percentage points, lowering the down payment ratio for second homes to 15.0%, and implementing a 500 billion renminbi swap facility to boost the capital market.
Simultaneously, recent rate cuts by the US Federal Reserve and the Bank of England, which both cut rates 0.25% on November 7, and the European Central Bank (ECB), which cut rates by 25 basis points on October 17, have been motivating other central banks to follow, although the cadence among different countries varies (Exhibit 2). Russia has been experiencing a rise in inflation because of wartime pressures. In October, the Central Bank of Russia (CBR) raised its key rate to 21%, which is the highest level since June. This brings the total increase since June to 500 basis points.
Among advanced economies, the growth story continues to be significantly different on either side of the Atlantic. In the US, real GDP increased at an annual rate of 2.8% in the third quarter of 2024, according to the advance estimate released by the US Bureau of Economic Analysis on October 30. In the second quarter, real GDP rose 3.0%.
Growth was much weaker in Europe. Third-quarter seasonally adjusted GDP in the eurozone rose 0.4% in the euro area and 0.3% in the EU (versus the previous quarter), according to a Eurostat preliminary flash estimate. In the second quarter, GDP had grown by 0.2% in the euro area and by 0.3% in the EU. Across the EU, GDP was up 0.9% versus third-quarter 2023. UK growth has been even more lackluster: monthly real GDP is estimated to have grown by 0.2% in August 2024, after showing no growth in July. Services, production, and construction output all grew. Real GDP is estimated to have grown by 0.2% in the three months to August 2024, compared with the three months to May.
Among emerging economies, growth is more positive, but there are mixed signals. China’s third-quarter GDP grew at a slower rate of 4.6% year on year, slightly down from the second quarter’s 4.7%; year-to-date GDP growth for the first three quarters stands at 4.8%. Trade accounted for 43% of GDP growth in Q3, consumption contributed 29%, and investment 28%.
India saw industrial production decline for the first time in almost two years, with all sectors contributing to the downturn. Consumer activity there rebounded in September. Increasing real wages and growing consumption—up 35% from a year ago—were seen in the rural population. The festive season also added a boost. Consumer confidence in Brazil remains below the neutral 100 mark but rose to 93.7 in September (93.2 in August), increasing for a fourth consecutive month. Business confidence in Brazil dropped slightly to 96.9 in September (97.7 in August), falling for the first time in seven months. In Mexico, consumer confidence was stable at 98.9 in September.
Central banks continue to anchor inflation expectations at near 2.0 to 2.3%. In the US, the consumer price index (CPI) rose 2.4% for the 12 months ending September, the smallest 12-month increase since February 2021. Annualized core inflation slightly increased to 3.3%. Looking ahead, US consumers’ inflation expectations at the one-year horizon remain unchanged at 3.0%, while at the five-year horizon they rose to 2.9% from 2.8%, according to the New York Fed’s Survey of Consumer Expectations in September.
Eurozone headline inflation was down to 1.7% in September, mainly due to a decline in energy prices (–6.1%). Core inflation stood at 2.7%, while services inflation was 3.9%, which points to lingering strong domestic price pressures, with wage growth still elevated (4.7% in 2024 Q2). The UK CPI declined to 1.7% in September. Core inflation (which excludes energy, food, alcohol, and tobacco) fell to 3.2%, from 3.6% in August.
Among emerging economies, inflation in India rose to 5.5% in September, approaching the upper limit of the Reserve Bank of India’s (RBI’s) target of 6.0%. The increase was primarily the result of rising food prices, which grew by 8.4%. Core inflation also rose but remains close to its lowest level historically. Brazil saw inflation rise to 4.42% in September (4.24% in August), but it remains inside the central bank’s 4.50% target upper limit. In Mexico, September’s inflation rate dropped to 4.6% from 5.0% in August, decreasing for the second consecutive month, following an upward trend since February. However, it sits outside the central bank’s target range of 2 to 4%.
Most commodity prices appeared stable in October but are significantly higher than prepandemic levels. However, the price of gold has continued to forge ahead, reflecting its safe-haven status during uncertain times.
Globally, manufacturing growth is on the rise, with the US and eurozone being big exceptions. August saw the industrial production index rise 1.8% month on month in the eurozone, although on a year-over-year basis it registered –0.2%. The composite purchasing managers’ index (PMI) reached 49.7 in October (49.6 in September) with the manufacturing PMI rising to 45.5, though both readings were still well within the contraction zone. The UK manufacturing sector recorded a further solid increase in production volumes at the end of the third quarter. Output and new orders both continued to rise, with the domestic market remaining the main driver of growth. The seasonally adjusted S&P Global UK Manufacturing PMI posted 51.5 in September, down from August’s 26-month high of 52.5.
Among emerging economies, Brazil’s manufacturing PMI climbed to 53.2 in September (50.4 in August), staying above the neutral 50 mark for a ninth consecutive month. In sharp contrast, Mexico’s manufacturing PMI reading in September signaled the fastest deterioration in the health of the sector for 32 months, falling from 48.5 in August to 47.3 in September and further into the contraction zone.
The services sector remains the brightest spot on the global economic map. In the eurozone, the services PMI declined to 51.2 in October (from 51.4 in September), but stayed within the expansion zone. Similarly, business activity across the UK services sector lost some momentum in September, but the services PMI stayed positive at 52.4 (53.7 in August). The headline index has remained within positive territory every month since November 2023.
The latest readings from Brazil signal a moderate expansion of service sector output, with the September services PMI climbing to 55.8 (54.2 in August). This helped the composite PMI rise from 52.9 to 55.2 in September, to sit within the expansion zone for a 12th consecutive month.
In September, unemployment rates remained stable across most surveyed economies. The US unemployment rate was little changed at 4.1% in September, down from August’s 4.2% (3.5% in January 2020). UK unemployment was estimated at 4%.
China saw the overall surveyed urban unemployment rate drop to 5.1% in September, down from 5.3% in August. The youth unemployment rate decreased to 17.6% in September, slightly down from 18.8% in August. India saw a 0.7-percentage-point decrease in its unemployment rate in September. In Brazil, the three-month moving average unemployment rate dropped to 6.6% in August (6.8% in July), down for the fifth time this year, and lower than the same period last year (7.8%). Mexico saw a slight rise in total unemployment, which was up 0.08 points in August to 2.76%. Employment in the formal economy experienced a decrease of some 91,000 employees.
Government bond yields in most countries have fallen slightly in the past few months. Equity markets grew steadily across most indexes in September and October. The US saw the S&P 500 gain 2.0% in September, bringing the one-year return to 34.4%. During September, the CBOE Volatility Index averaged 19.2 (15.0 in August).
Total port trade experienced a strong decline in September 2024 compared with the same period in 2023, primarily driven by decreases in activity globally. Meanwhile, global supply chain pressure fell slightly in September, to a level close to the historical average. Freight rates remain stable but are positioned at significantly higher levels than they have been historically.
The US recorded exports of $271.8 billion in August, $5.3 billion more than July’s total. August imports were $342.2 billion, $3.2 billion less than in July. The deficit in August was down 10.8% on the previous month at $70.4 billion. Meanwhile, the eurozone remained in surplus, but this shrank to €4.6 billion in August (€19.7 billion in July). The decline was mainly driven by a fall in exports to China (–9.3% year on year) and a jump in imports (+15.6% year on year) for miscellaneous manufactured articles. In the third quarter, China saw cross-border trade growth pick up to 4.2% (3.3% in second quarter). Export growth accelerated to 5.4% (4.4% in second quarter), and import growth increased to 2.6% (1.7% in second quarter).
McKinsey’s Global Economics Intelligence (GEI) provides macroeconomic data and analysis of the world economy. Each monthly release includes an executive summary on global critical trends and risks, as well as focused insights on the latest national and regional developments. View the full report for October 2024 here. Detailed visualized data for the global economy, with focused reports on selected individual economies, are also provided as PDF downloads on McKinsey.com. The reports are available free to email subscribers and through the McKinsey Insights app. To add a name to our subscriber list, click here. GEI is a joint project of McKinsey’s Strategy & Corporate Finance Practice and the McKinsey Global Institute.
