Financial and Monetary Systems

US leads global growth in latest IMF Outlook, and other economy stories to read this week

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Top economy stories: IMF: US main driver of global growth; UK readies for new government's first budget; and more

Top economy stories: IMF: US main driver of global growth; UK readies for new government's first budget; and more Image: Unsplash/NASA

Rebecca Geldard
Senior Writer, Forum Agenda
  • This weekly round-up brings you the latest stories from the world of economics and finance.
  • Top economy stories: IMF: US main driver of global growth; UK readies for new government's first budget; Eurozone shows more signs of recovery.

1. IMF highlights US as central driver of global economic growth

The US economy is set to drive global growth through 2024 and 2025, fuelled by strong consumer spending, according to the International Monetary Fund’s (IMF) latest World Economic Outlook.

The IMF raised the country's growth forecasts to 2.8% for 2024 and 2.2% for 2025, making it the only developed economy to receive upgrades for both years.

Global growth is projected to hold at 3.2% in 2024, down slightly from July's prediction, and expected to drop to 3.1% over the next five years. But, despite geopolitical, trade and other risks, including the possibility of significant tariff hikes and retaliatory actions, the IMF sees resilience in key markets, including Brazil, India and southeast Asia.

"The news on the US is very good in a sense," IMF chief economist Pierre-Olivier Gourinchas said in a Washington press briefing, as reported by Reuters, adding that "the risks of a recession in the US in the absence of a very sharp shock would be somewhat diminished".

A line chart that compares key inflation metrics over the past five years.
US inflation is slowing down. Image: Reuters/LSEG

US economic activity has remained largely unchanged from September through early October, with a slight increase in hiring, according to the Federal Reserve's latest Beige Book report.

Inflation is slowing down, but the cost of materials and production is still rising faster than companies can increase their prices, reducing their profits. The Fed is therefore more likely to make a smaller interest rate cut of 0.25% at its policy meeting in November, Reuters says.

"Despite elevated uncertainty, contacts were somewhat more optimistic about the longer-term outlook," the report noted, ahead of the 5 November presidential election.

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2. UK's new government plans ambitious budget amid IMF growth boost

British finance minister Rachel Reeves is set to unveil a transformative budget for the world’s sixth-largest economy next week, aimed at boosting public investment while carefully managing debt, reports Reuters.

As the Labour party's first budget in over a decade, it's expected to outline significant tax increases and spending measures to address critical infrastructure needs.

Reeves, a former Bank of England economist, has signalled caution about excessive borrowing, referencing past market turmoil under previous governments. “We need to invest more to grow our economy and seize the huge opportunities there are in digital, in tech, in life sciences, in clean energy,” she said on Thursday.

The UK All-share stock index briefly kept pace with global stocks before the July 4 general election, then fell back.
UK stocks are underperforming due to budget uncertainty. Image: Reuters/LSEG

British consumer confidence dropped to its lowest level since March ahead of the new government's first budget, falling to -21 in October amid concerns over potential tax hikes, according to a GfK survey.

However, the country's economy is expected to "accelerate", with the IMF raising its 2024 growth forecast from 0.7% to 1.1%, the BBC reports. This would put the UK in the "middle of the pack" of leading global economies. Reeves welcomed the boost, noting there’s still "more work to do".

3. News in brief: Stories on the economy from around the world

Bank of Japan Governor Kazuo Ueda noted growing optimism about the US economy but highlighted market instability, signalling mixed risks for Japan’s economy. He emphasized caution on future interest rate hikes due to uncertainty around a US "soft landing" and volatile markets.

Eurozone bank lending rebounded in September, with company loans rising 1.1% and household lending up 0.7%, indicating gradual economic improvement. German business sentiment also exceeded expectations, though a rapid recovery remains unlikely, says Reuters.

A line chart showing the relative performance of European bank shares. global growth
Eurozone banks see boost. Image: Reuters/LSEG

The country's business activity contracted again in October but less than the previous month and showed signs of stabilizing. This improvement was driven by unexpected service sector growth despite continued strain on manufacturing. High energy costs and labour shortages remain key challenges.

Brazil plans to track its non-inflationary growth potential alongside gross domestic product to prove sustainable economic expansion is possible, the country's planning minister announced at this week's IMF-World Bank meetings. The IMF recently raised Brazil’s growth forecast for this year to 3.0%, marking the largest upward revision among major economies.

The Bank of Canada cut its key benchmark rate by 50 basis points to 3.75% on Wednesday, its first larger-than-usual move in over four years, reports Al Jazeera. This decision follows a decline in inflation to 1.6% in September, below the 2% target, after four consecutive rate cuts since June.

South Africa’s rand could strengthen further with continued government reforms and prudent fiscal policies, according to the governor of its central bank, Lesetja Kganyago. Recent Treasury initiatives have targeted energy, freight and telecommunications sectors to boost economic stability.

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Contents
1. IMF highlights US as central driver of global economic growth2. UK's new government plans ambitious budget amid IMF growth boost3. News in brief: Stories on the economy from around the world4. More on finance and the economy from our blog

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