The latest data suggest that, outside China, the world economy lost a bit of momentum heading into 2025. Around the turn of the year, manufacturing output kept treading water, retail sales weakened in advanced economies, and business survey indicators deteriorated or pointed to weaker activity in January. The two bright spots in DMs have been a recovery in bank lending growth and a pick-up in employment growth. However, softer hiring intentions in many cases suggest that the rebound in jobs growth will not last. In China, activity has benefitted from policy support, and we expect this to continue until mid-year, when the uplift from fiscal policy will fade and higher US tariffs will hurt exports. At this early stage, the data are consistent with our view that global GDP will grow at a below trend pace in 2025. This will help to weigh on inflation outside the US and allow most central banks to continuing cutting interest rates.
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