Widespread geopolitical instability is driving economic uncertainty, as political shifts gain traction around the world. For now, global markets and growth remain mostly stable, but policymakers and business leaders are bracing for potential disruption as new elected officials take power (Exhibit 1).
With President Trump taking office in January, businesses and analysts are seeking clarity on what his second term might bring in terms of economic policies. The US Federal Reserve and other leading central banks are cautious about future rate decisions.
The US1 tentatively projects higher growth than previously estimated for next year—but accompanied by meaningfully higher inflation. Consequently, current market expectations are for just a single US rate cut by the Fed during 2025. By contrast, eurozone real GDP growth is expected to be a lower-than-anticipated 0.7% in 2024 and 1.1% in 2025, according to the European Central Bank’s (ECB) December projections. The latest ECB projections revised the GDP growth outlook down –0.1 percentage points in 2024 and –0.2 percentage points in 2025.
In the eurozone, December has been a particularly volatile period politically. Germany, Europe’s largest economy and normally a pillar of stability, is facing snap elections next year after Chancellor Olaf Scholz lost a confidence vote on December 16. Meanwhile, France’s President Emmanuel Macron appointed François Bayrou as prime minister on December 13, following a vote of no confidence in Michel Barnier on December 4, during which left and right wing opposition politicians united to defeat the center-right government.
Meanwhile, the UK economy faces headwinds, with some commentators attributing its recent mixed performance in part to businesses’ reaction to government policies announced in October’s budget. These included close to £40 billion in tax increases, with a rise in National Insurance contributions among the most significant. On December 19, the Bank of England announced it had downgraded its growth forecast for the final quarter of 2024, to 0% from 0.3% at the start of November. Meanwhile, the latest Confederation of British Industry (CBI) Growth Indicator, released December 23, reports growth expectations are now at their weakest in more than two years. Private sector companies expect activity next year to fall in the three months ending in March (with a weighted balance of –24%), the CBI states.
Although GDP in the emerging economies has been somewhat higher than in the developed economies, China has been looking to reinvigorate its economy with a series of stimulus measures over recent months. At its Central Economic Work Conference held in mid-December, the government identified insufficient domestic demand as the primary challenge and outlined its economic priorities for 2025. These include boosting domestic demand, stabilizing the real estate sector, and advancing innovation to drive sustainable growth. Analysts want to see what solutions emerge next year. Meanwhile, India’s economy continues to exhibit resilience and growth, with robust performance in key sectors despite global economic headwinds. A GDP growth rate for fiscal year 2024–25 is projected at 6.5%, supported by strong domestic consumption and rising private investments.
As expected, the Fed cut rates on December 18, along with the ECB—both by 25 basis points (Exhibit 2). The Bank of England, meanwhile, held its policy rate at 4.75%, while the Reserve Bank of India maintained the repo rate at 6.5% at its December policy meeting. In contrast, Brazil’s Monetary Policy Committee (Copom) hiked the Selic rate from 11.25 to 12.25% during its latest meeting on December 10 and anticipated further rises in the new year.
Consumer confidence is weak but has mostly stabilized, indicating that consumers are holding off on major purchases. The US consumer confidence index (Conference Board) increased in November to 111.7, up from 109.6 in October. US retail and food services sales for November (adjusted for seasonal variation and holiday and trading-day differences) were $724.6 billion—a 0.7% increase from October. Consumer confidence in Brazil remains below the neutral 100 mark but ticked up to 95.6 in November (93.0 in October), continuing its upward trend after decreasing for one month. Business confidence fell slightly to 97.4 in November (97.9 in October), reaching its lowest level since June.
Inflation edged up in November for both consumers and producers in developed countries, whereas inflation in developing economies remained largely stable. Overall inflation expectations remain unchanged.
The US consumer price index (CPI) rose 2.7% for the 12 months ending in November, after rising 2.6% over the 12 months ending in October. Core inflation slightly increased to 3.3% (annualized) in November. Eurozone headline inflation was up to 2.2% in November, mainly because of an uptick in energy prices (0.5% month over month), while core inflation stood at 2.8%. Services inflation was 3.9%, which continues to point to strong domestic price pressures, with wages growth still elevated (4.6% in the third quarter of 2024). Producer prices have been in positive territory since December but recorded –0.3% month over month and –0.1% year over year in November 2024. UK inflation increased for the second consecutive month, reaching 2.6% (from October’s CPI reading of 2.3%).
Among emerging economies, inflation in China remains low, with the CPI registering a modest 0.2% in November, a slight dip from October’s 0.3%. Meanwhile, producer prices registered a decline of −2.5% in November, compared with −2.9% the previous month. In India, headline inflation eased to 5.5% in November due to declining fuel prices and slower growth in food prices. In Brazil, inflation climbed to 4.87% in November (4.76% in October), increasing for a third consecutive month and breaching the central bank’s target upper limit (4.50%) for the second time. Mexico saw the inflation rate drop to 4.6% in November (4.8% in October), its lowest in eight months, but remaining outside the central bank’s target range of 2–4%. Russia’s tight wartime economy continues to be a special case, with consumer price inflation elevated at around 9% year over year in November.
Overall, agriculture prices increased in November, while other commodity prices declined. Food prices continue to rise, driven by vegetable oils. Metal prices ended 2024 on a weaker note, as most experienced declines. Gold prices declined and then stabilized at approximately $2,650 per ounce. Oil prices have been declining and reached their lowest point in 2024.
After four months of declines, manufacturing has finally stopped contracting: the manufacturing sector in emerging markets is gaining momentum, while developed economies continue to struggle. Services sectors around the world are showing mixed performance, with the eurozone slipping back into contraction territory.
In the US, the industrial production index dropped slightly to 101.9 in November (102.3 in October). December’s purchasing managers’ index (PMI) for manufacturing fell to 48.5 from 49.7 in the previous month, while the services PMI increased to 58.5 (56.1 in November). Across the Atlantic, the eurozone’s industrial production index was stable month over month but decreased by 1.2% year over year in October. The composite PMI stood at 49.5 in December versus 48.3 in November; the services PMI rose to 51.4 in December (49.5 in November), while the manufacturing PMI was steady at 45.2. UK PMI data for December highlights ongoing sectoral challenges. The manufacturing PMI dropped to 48.7, signaling a contraction as firms faced weakening demand and lingering supply chain disruptions. Conversely, the services PMI remained above the 50.0 threshold at 50.8, pointing to modest growth, although at a slower pace than in previous months.
In November, India’s industrial production grew by 3.5%, driven by primary and construction goods. The manufacturing PMI remained at a healthy 56.5. Brazil’s manufacturing industry also remained in expansion mode midway through the final quarter, as resilient domestic demand encouraged firms to scale up production volumes. Despite falling from 52.9 in October to 52.3 in November, the manufacturing PMI remained above the neutral mark of 50.0 for the 11th consecutive month. Underlying data showed that the rise in total sales was domestically driven, as new export orders slipped into contraction. Meanwhile, the services PMI fell to 53.6 in November (56.2 in October). Mexico’s PMI for manufacturing rose from 48.4 in October to 49.9 in November.
Unemployment rates remained stable across most surveyed economies in November, although India saw a 0.7 percentage point decrease. In the US, the unemployment rate was little changed at 4.2% in November (3.5% in January 2020). Similarly, UK unemployment was steady at 4.2%, but job vacancies continued to decline, marking the 28th consecutive monthly drop. Total unemployment in Mexico dropped by 0.23 percentage points in October, reaching 2.48%.
The mixed performance among equity markets continued into December. The cost of capital for the government in Brazil has skyrocketed, driven by concerns about inflation, the fiscal situation, and monetary policy tightening.
Total port trade remains below the one-year-ago level but experienced a recovery in November 2024. Chinese ports saw a decline in port trade, as reflected in their container throughput index; European throughput rose sharply. Supply chain pressures have eased below the long-term average and have remained there for two consecutive months. In the US, October exports reached $265.7 billion, $4.3 billion less than September exports; October’s imports were $339.6 billion, $14.3 billion less than in September. The monthly deficit decreased by 11.9% to $73.8 billion in October.
McKinsey’s Global Economics Intelligence (GEI) provides macroeconomic data and analysis of the world economy. Each monthly release includes an executive summary on global critical trends and risks, as well as focused insights on the latest national and regional developments. View the full report for December 2024 here. Detailed visualized data for the global economy, with focused reports on selected individual economies, are also provided as PDF downloads on McKinsey.com. The reports are available free to email subscribers and through the McKinsey Insights app. To add a name to our subscriber list, click here. GEI is a joint project of McKinsey’s Strategy & Corporate Finance Practice and the McKinsey Global Institute.
