A few days to the settlement of Donald Trump and, despite the unexpected tightening of the Federal Reserve’s approach – and the resulting increase in volatility – the reference macro scenario is largely unchanged compared to the previous month, with the exception of European and Italian stockswhere “the view passes from neutral/positive to positive“.
This is what the latest monthly report explains Soul Flashwhich n terms of growth a still solid economy awaitsalbeit with a moderate slowdown in the United States and a weak recovery – below potential and below consensus – in the Euro Area. In China, the prospects for improved growth are closely linked to the stimuli coming from the authorities and American trade policy. With reference to price dynamics, the disinflationary process confirms expectations on both sides of the Atlantic: core inflation converges towards the targetdriven mainly by service prices. In China, however, significant improvement seems unlikely until stimulus measures are fully implemented.
Growth prospects
The economy USA remains oriented towards a “soft-soft landing”: from 2024 to 2025 growth should fall from 2.8% to 2.3% and the consensus is also approaching our estimates, which have long been more optimistic. Overall, the disposable income and spending for consumption they remain at levels largely higher than the pre-Covid trendand the risks for the fourth quarter are tilted to the upside. The job markethowever, continues in his cooling: despite the good data on the creation of new jobs, on the one hand there is a return in demand towards pre-Covid levels and on the other the number of people who become unemployed and remain so is increasing.
In Euro areathe economy avoid recession but it is far from a noteworthy recovery. The GDP figure for the third quarter was positive, but this result can be largely explained by the strength of French private consumption, inflated by the Olympic Games. Analyzing data on trust of businesses – below 50 for both manufacturing and services – a disheartening picture. The areas of weakness are numerous: from real estate to foreign demand, passing through the structural problems that afflict Germany, where the negative output gap is attributable to the lack of productivity, which in turn could reflect the lack of investments.
Inflation towards target
In the United States continues decline in core inflation and for the first time the consensus is more aggressive than our view on the core PCE index. Leading indicators linked to wage dynamics signal that the downward trend for supercore inflation should consolidate in the coming quarters. Breaking down the GDP deflator, we note that the profit component, crucial in the inflationary flare-up of 2022, has shrunk: companies make harder to pass on price increases to consumers, which suggests that the impact of any tariffs it could come absorbed more easily.
In Euro area momentum on a quarterly basis for inflation on serviceswhich remained stable at around 4% throughout 2024 due to a series of idiosyncratic factors, from low Easter to major sporting events in the summer, it’s getting weakeror. For next year we expect some support from base effects, and leading indicators also suggest a recovery disinflation process.
In China macro momentum remains weak and it is unlikely to improve before the stimulus measures are fully implemented: in 2024 we expect one growth below potentialheld back by still depressed domestic demand. In this framework, inflation will not increase except marginally. The helm remains in the hands of the Beijing authorities, who, although determined to support the economy, seem to want to keep room for maneuver to respond to Trump’s possible tariffs and have yet to resolve the long-standing problems of the real estate, banking and stimulus sectors tax.
Overall – say the Anima experts – “we expect gradual stimuli waiting to understand what the new US Administration will decide.”
Focus on monetary policies
At the December meeting, the Fed it cut rates by 25 basis points but also revised its forecasts for next year in the spirit of caution on the downward path of rates and inflation. For 2025 we remain of the opinion that they will be delivered cuts for a total of 100 points basic, in four interventions distributed over the different quarters of the year; however, we continue to see risks oriented towards a slightly less accommodative approachespecially in the face of upward surprises in growth data.
There ECB continues on its path of rate cuts and in the last meeting of the year the Board of Directors strengthened its own bias bias: expectations are moving towards five rate cuts of 25 points basis each in the first three quarters of 2025, until the deposit rate is brought just below the neutral level. They justify this choice by trust in ability of inflation to reach the targetdownside risks to the growth outlook and expectations of a sharp decline in service price levels.
In Chinathe experts conclude, we expect that the People’s Bank of China works to do its part in supporting the economy, even if monetary policy – which remains accommodative – will remain linked to the implementation of the fiscal stimuli and the decisions that will be taken to support the real estate sector.
