As 2025 approaches, Capital Economics analysts mentioned in a observe this week that they anticipate a modest restoration for many main international economies following a difficult second half of 2024.
Based on the agency’s evaluation, two key themes will form superior economies: the normalization of inflation and the loosening of financial coverage, “both of which should offer some support to GDP growth,” mentioned the agency.
Moreover, China’s restoration is predicted to select up as fiscal stimulus takes impact, though ongoing commerce tensions with the U.S. and its allies could restrict its progress potential.
Nevertheless, a number of dangers stay on the horizon, in response to Capital Economics. The agency highlights the “stickiness of inflation, especially in Europe,” which might hinder actual earnings progress and scale back the scope for coverage easing.
Furthermore, political transitions in numerous international locations are mentioned to pose uncertainties, with potential dangers round debt-funded stimulus and monetary market reactions.
The agency believes the rise of isolationist commerce insurance policies and stronger pushback towards immigration are additionally flagged as issues, probably resulting in stagflationary results in superior markets.
Whereas some concern that recession is on the horizon for 2025, Capital Economics stays cautiously optimistic.
They observe warning indicators comparable to a downturn in manufacturing surveys, rising unemployment, and rising mortgage delinquencies, however emphasize that these indicators alone do not assure a recession.
“Trends in credit, employment, retail sales, and construction still paint a broadly positive picture,” mentioned Capital Economics.
Total, they predict {that a} “soft landing is the most likely outcome” for 2025, although they’re intently monitoring the evolving dangers.
