Top of main content

Macro Monthly: Ticking along

12 July 2024

Key takeaways

  • Elections in the UK and France have dominated the news but, for now, attention turns back to the data …
  • … with key questions over whether the progress on growth and inflation can continue.
  • Our global GDP growth forecasts remain at 2.6% this year, despite changes to some country projections.

Politics take centre stage

Elections have dominated the discourse in recent weeks, with the UK election seeing the Labour Party win a large majority in parliament. The French legislative elections, saw a surprise result as the far-right RN, widely expected to win the most seats, came in third behind President Macron’s allies and the left-wing NFP. In the US, the first Presidential debate led to a sharp move in betting markets – now suggesting a decent chance President Biden isn’t on the ticket in November (RealClearPolitics).

Focus back on the data

Survey and hard data continue to move higher

Despite these risks, the economic data across the world keep ticking along. We’ve seen another round of broadly decent global PMI data (see Chart 1), despite weakness in some pockets. US labour market data have wobbled a bit, but we still have a situation with steady employment (see Chart 2), and an ample household savings stock across the world.

Source: Macrobond

Source: Macrobond

Inflation risks resurfacing?

Commodity prices could keep upward pressure on inflation

The challenge is still that this brighter growth outlook is keeping some areas of inflation stickier – most notably on the consumer services side (see Chart 3). Equally, we’ve seen some moves in input costs pressures on the goods side that could be getting more concerning. Freight costs have spiked and many commodity prices are either rising or staying at elevated levels (see Chart 4), putting upward pressure on goods inflation.

Source: Macrobond

Source: Macrobond

Central banks diverging

Monetary policy is tilting towards easing

As a result, we’re seeing a divergence in the approach from central banks. In much of Europe, policymakers have seen enough, and have either cut or made it clear they are ready to cut rates. In the US, the Federal Open Market Committee remains divided over the timing of rate cuts, still wanting to see a bit more clarity on the path lower for inflation. Overall, we expect two more rate cuts this year from the European Central Bank but only one from the Federal Reserve (Fed). Central banks in Asia are ready to follow the Fed, while those in LatAm have slowed their easing.

Dodging the dangers

Global growth is robust but may be slowing

For now, the global economy has done a remarkably good job of avoiding the huge number of pitfalls so far this year. But the risks haven’t gone away, and with political change and geopolitical uncertainty, we cannot assume that these challenges can be overcome indefinitely.

Our GDP growth forecasts

We forecast 2.6% global GDP growth for this year and next

The overall impact is little or no change to our growth forecasts. One familiar exception is India following another upside surprise in Q1 and where we now project 7.3% growth this year. But our 2024 global GDP forecast stays at 2.6%. We made small upgrades to our European forecasts, but these are largely offset by downgrades to Mexico, Thailand, Japan, Australia and New Zealand. We also kept our 2025 global GDP growth forecast at 2.6% as we anticipate neither much stimulus nor much slack to provide scope for a rapid V-shaped recovery.

Note: *India data is calendar year forecast here for comparability. Previous forecasts are shown in parenthesis, and are from the Macro Monthly dated 13 April 2024.

Green indicates an upward revision, red indicates a downward revision.

Source: Bloomberg, HSBC Economics

Source: Bloomberg, HSBC

⬆Positive surprise – actual is higher than consensus, ⬇ Negative surprise – actual is lower than consensus, ➡ Actual is in line with consensus

Source: Refinitiv Eikon, HSBC

Related Insights

Despite inflation no longer surprising on the downside, we expect major central banks to...[15 Apr]
Federal Reserve rate cuts move closer and US election uncertainty rises. [11 Sep]
Global growth data is still ticking along, but there are early signs of labour markets…[11 Jun]

Disclosure appendix

Additional disclosures

1. This report is dated as at 11 July 2024.

2. All market data included in this report are dated as at close 10 July 2024, unless a different date and/or a specific time of day is indicated in the report.

3. HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business.Information Barrier procedures are in place between the Investment Banking, Principal Trading, and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.

4. You are not permitted to use, for reference, any data in this document for the purpose of (i) determining the interest payable, or other sums due, under loan agreements or under other financial contracts or instruments, (ii) determining the price at which a financial instrument may be bought or sold or traded or redeemed, or the value of a financial instrument, and/or (iii) measuring the performance of a financial instrument or of an investment fund.

Disclaimer

This document is prepared by The Hongkong and Shanghai Banking Corporation Limited (‘HBAP’), 1 Queen’s Road Central, Hong Kong. HBAP is incorporated in Hong Kong and is part of the HSBC Group. This document is distributed by HSBC Bank Canada, HSBC Continental Europe, HBAP, HSBC Bank (Singapore) Limited, HSBC Bank (Taiwan) Limited, HSBC Bank Malaysia Berhad (198401015221 (127776-V))/HSBC Amanah Malaysia Berhad (200801006421 (807705-X)), The Hongkong and Shanghai Banking Corporation Limited, India (HSBC India), HSBC Bank Middle East Limited, HSBC UK Bank plc, HSBC Bank plc, Jersey Branch, and HSBC Bank plc, Guernsey Branch, HSBC Private Bank (Suisse) SA, HSBC Private Bank (Suisse) SA DIFC Branch, HSBC Private Bank Suisse SA, South Africa Representative Office, HSBC Financial Services (Lebanon) SAL, HSBC Private banking (Luxembourg) SA and The Hongkong and Shanghai Banking Corporation Limited (collectively, the “Distributors”) to their respective clients. This document is for general circulation and information purposes only. This document is not prepared with any particular customers or purposes in mind and does not take into account any investment objectives, financial situation or personal circumstances or needs of any particular customer. HBAP has prepared this document based on publicly available information at the time of preparation from sources it believes to be reliable but it has not independently verified such information. The contents of this document are subject to change without notice. HBAP and the Distributors are not responsible for any loss, damage or other consequences of any kind that you may incur or suffer as a result of, arising from or relating to your use of or reliance on this document. HBAP and the Distributors give no guarantee, representation or warranty as to the accuracy, timeliness or completeness of this document. Thisdocument is not investment advice or recommendation nor is it intended to sell investments or services or solicit purchases or subscriptions for them. You should not use or rely on this document in making any investment decision. HBAP and the Distributorsare not responsible for such use or reliance by you. You should consult your professional advisor in your jurisdiction if you have any questions regarding the contents of this document. You should not reproduce or further distribute the contents of this document to any person or entity, whether in whole or in part, for any purpose. This document may not be distributed to any jurisdiction where its distribution is unlawful.

The following statement is only applicable to HSBC Bank (Taiwan) Limited with regard to how the publication is distributed to its customers: HSBC Bank (Taiwan) Limited (“the Bank”) shall fulfill the fiduciary duty act as a reasonable person once in exercising offering/conducting ordinary care in offering trust services/business.

However,the Bank disclaims any guaranty on the management or operation performance of the trust business. The following statement is only applicable to by HSBC Bank Australia with regard to how the publication is distributed to itscustomers: This document is distributed by HSBC Bank Australia Limited ABN 48 006 434 162, AFSL/ACL 232595 (HBAU). HBAP has a Sydney Branch ARBN 117 925 970 AFSL 301737.The statements contained in this document are general in nature and do not constitute investment research or a recommendation, or a statement of opinion (financial product advice) to buy or sell investments. This document has not taken into account your personal objectives, financial situation and needs. Because of that, before acting on the document you should consider its appropriateness to you, with regard to your objectives, financial situation, and needs.

Important Information about the Hongkong and Shanghai Banking Corporation Limited, India (“HSBC India”)

HSBC India is a branch of The Hongkong and Shanghai Banking Corporation Limited. HSBC India is a distributor of mutual funds and referrer of investment products from third party entities registered and regulated in India. HSBC India does not distribute investment products to those persons who are either the citizens or residents of United States of America (USA), Canada, Australia or New Zealand or any other jurisdiction where such distribution would be contrary to law or regulation.

Mainland China

In mainland China, this document is distributed by HSBC Bank (China)Company Limited (“HBCN”) and HSBC FinTech Services (Shanghai) Company Limited to its customers for general reference only. This document is not, and is not intended to be, for the purpose of providing securities and futures investment advisory services orfinancial information services, or promoting or selling any wealth management product. This document provides all content and information solely on an "as-is/as-available" basis. You SHOULD consult your own professional adviser if you have any questions regarding this document.

The material contained in this document is for general information purposes only and does not constitute investment research or advice or a recommendation to buy or sell investments. Some of the statements contained in this document may be considered forward looking statements which provide current expectations or forecasts of future events. Such forward looking statements are not guarantees of future performance or events and involve risks and uncertainties. Actual results may differ materially from those described in such forward-looking statements as a result of various factors. HSBC India does not undertake any obligation to update the forward-looking statements contained herein, or to update the reasons why actual resultscould differ from those projected in the forward-looking statements. Investments are subject to market risk, read all investment related documents carefully.

© Copyright 2024. The Hongkong and Shanghai Banking Corporation Limited, ALL RIGHTS RESERVED.

No part of this document may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of The Hongkong and Shanghai Banking Corporation Limited.

Important information on sustainable investing

“Sustainable investments” include investment approaches or instruments which consider environmental, social, governance and/or other sustainability factors (collectively, “sustainability”) to varying degrees. Certain instruments we include within this category may be in the process of changing to deliver sustainability outcomes.

There is no guarantee that sustainable investments will produce returns similar to those which don’t consider these factors. Sustainable investments may diverge from traditional market benchmarks.

In addition, there is no standard definition of, or measurement criteria for sustainable investments, or the impact of sustainable investments (“sustainability impact”). Sustainable investment and sustainability impact measurement criteria are (a) highly subjective and (b) may vary significantly across and within sectors.

HSBC may rely on measurement criteria devised and/or reported by third party providers or issuers. HSBC does not always conduct its own specific due diligence in relation to measurement criteria. There is no guarantee: (a) that the nature of the sustainability impact or measurement criteria of an investment will be aligned with any particular investor’s sustainability goals; or (b) that the stated level or target level of sustainability impact will be achieved.

Sustainable investing is an evolving area and new regulations may come into effect which may affect how an investment is categorised or labelled. An investment which is considered to fulfil sustainable criteria today may not meet those criteria at some point in the future.