Key takeaways

• As we step into 2025, the short-term outlook remains uncertain…
• …in terms of trade, inflation, growth, and policy choices…
• …and so we highlight the key data to track as the year progresses.

Despite a myriad of challenges, the global economy performed better than we may have expected in 2024 – a year marked by multiple elections, elevated interest rates and geopolitical uncertainty. Inflation moderated at a decent pace over the year – sufficiently to allow most central banks to begin their easing cycles.

2025 looks set to be a year of enormous uncertainty again. This time, surrounding president-elect Trump’s second term and the path of US policy that could influence so many corners of the global economy, from the strength of US demand and global trade flows to how much more easing is delivered by the Federal Reserve.

Trade risks

Trade policy will be key. There is clearly a lot of uncertainty around how Trump’s tariff announcements will translate to policy – especially around what rates will actually be levied, how and the timing. The question is whether trade can continue to be an engine of growth for key economies around the world. Global goods trade seems to be holding up for now, but the risks are firmly tilted to the downside.

Source: Macrobond

Source: Peterson Institute for International Economics (PIIE)

Europe’s growth challenges

Another question mark hangs over Europe after a year of political change and weak growth. Indeed, the region’s composite PMI remained in contraction in December, highlighting continued weakness in manufacturing, particularly in France and Germany, however services returned to growth. We expect the European Central Bank to continue their gradual pace of easing this year, with another three 25bp cuts at the January, March and April meetings.

Source: Macrobond

Source: Macrobond

Inflationary battles

On the inflation front, despite the progress in 2024, the war against inflation isn’t quite over. There are pockets of price pressures in different parts of the world, such as US rental inflation, that are hanging around making some central bankers nervous about their easing plans. However, with some core goods and food prices rising again we could see strains in terms of household incomes that hold back consumer demand.

Source: Macrobond

Source: Macrobond

Finally, there are plenty of questions over the direction of policy across the world (not just in the US) in a year following big electoral change. Will governments be able to deliver their promises to voters in a world of elevated debt and growing bills to pay? All in all, it looks set to be another highly unpredictable year, and tracking the right data will be crucial to guide us all through it.

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

https://www.hsbc.com.my/wealth/insights/market-outlook/macro-monthly/2025-01/