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Now that we are moving into 2024, it’s a good time to take a look at what to expect over the next 12 months. In this market outlook, we’ll dive deep into the global macroeconomic landscape and its impact on shifting consumer behaviors and its impact on economies worldwide.
The global macroeconomic keyword for 2024 is, in general terms, “slowness”. While we do not expect a recessionary year for most global economies, it’s unlikely to be a year of solid growth either.
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General macroeconomic slowness is something that is not commonly associated with a year ending with a US presidential election, particularly one in which the incumbent president is running for a second term. While “this time is different” is a common phrase used to mock economic prophets pronouncing a breakpoint in the economic laws due to a new era starting, this year might actually be different.
Unsurprisingly, US economic growth is likely to beat European growth, but due to the era of high inflation and the still elevated levels we’ve recently seen along with the rapid rise in interest rates, the economy is still moving ahead in slow motion. A lack of investment is one major cause.
The European economy is likely to suffer from high inflation even more as it has gotten used to extremely low interest rates during the previous decade and now the ECB remains, at least rhetorically, persistently more hawkish in its rate policy than its US counterpart.
Consumer demand makes or breaks the US and European economies. It has helped these economies so far and it is the top factor to analyze this year. The focus should be on consumer spending instead of consumer sentiment due to the reported disparity between reality and feeling indicators.
The economic outlook for China is connected to both of the above-mentioned economies, as China is the key provider of many goods consumed globally, and lower consumption can reduce Chinese growth as well. For China, the key factor determining its economic surprise potential is still its domestic consumer demand and investment. If Chinese consumers start spending, the economy should gain support, which could create positive momentum and investment, depending on the strength of demand.
Why should one expect the unexpected? Because the global macroeconomic state is also prone to some significant risks – some positive but unfortunately most of them negative – and the negative risks are not only macroeconomic risks.
As evident from any news outlet, geopolitics have climbed to the top of the agenda, and they pose significant risks to the global economic performance. Escalation of tensions in the Middle East and Russia’s continued warfare and belligerence, just to mention the obvious, have the potential to impact regional and global economies negatively. And once one crisis is (somewhat) settled, or at least supply chains are reorganized to cope with the impact, another is fully primed and waiting around the corner. Every emerging crisis has the potential to stall the already slow performance.
That takes us to the positive risks, which unfortunately are not connected to the de-escalation of the current crises. One of the key levers for economic performance in both the US and Europe – and, of course, in China as well – is consumer spending. With interest rates still relatively elevated, consumer spending has been somewhat subdued, but any drop in rates could alleviate this economic pain and also have a knock-on effect on the economy. It’s worth noting that while economic growth is relatively slow, and consumer sentiment, in particular, is poor, employment numbers are solid, so consumer demand has been the one-factor keeping growth positive or at least flat. Anything that could change consumer behavior would be one of the “unexpected.”
This could also be the year that India, the world’s most populous nation, expands its role in the global economy. There are indications that India might start to take a stand in the maritime transport threat seen in the Arabian Sea. If so, this could be a step toward gaining a larger economic role as well. With high growth rates and a very large population, the economic growth potential of India is significant, and while it all comes down to domestic political decisions, there is a chance that India could become a large source of global economic growth from 2024 onward.
In this analysis, we’ve explored the macroeconomic outlook for commodity markets in 2024, identifying three areas to pay close attention to this year.
Consumer demand remains a crucial factor in the US and European economies, with a focus on spending rather than sentiment. The role of renewable energy and electric transportation could be pivotal in the global economy by 2024. Despite tensions in the Middle East, global benchmark oil prices have remained stable, indicating the potential impact of renewables. India’s growth also holds significance in shaping the global macro economy in 2024 and beyond.
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