Economic review

A divided growth pattern

The global economy grew by about 3% in 2024, in line with expectations. However, the performance of different regions varied. The US economy exceeded all forecasts with an estimated growth rate of 2.7%, while the eurozone showed moderate growth of 0.8%. This stagnation in Europe was caused by cautious consumer spending and investment, despite an increase in exports and public spending. China is likely to meet its 5% growth target, but that is well below the average annual growth rate of recent decades.

Inflation on the move

The sharp rise in inflation in recent years has slowly ebbed away. In both the United States and the eurozone, inflation fell towards the 2% targets of central banks. However, core inflation, excluding volatile food and energy prices, remained high. This was mainly due to price increases in the service sectors, which were again caused by labour shortages and by wage increases. This had an impact on services inflation, but less on goods inflation. Central banks responded with interest rate cuts: the Bank of England cut the policy rate by 50 basis points, the Fed (US central bank) and the ECB (European Central Bank) both by 75 basis points and the Bank of Canada by 175 basis points. On the other hand, the Bank of Japan abandoned its zero interest rate policy with an interest rate hike.