Global Economic Overview – November 2024
02 December 2024
The election of Donald Trump for a second term as US President has shifted the risks surrounding the global economic outlook.
5 min read
Key predictions
1.5%
UK GDP growth
3.75%
UK Bank rate by end of 2025
c.2%
UK inflation by end of 2025
1.28
GBP/USD by end of 2025
1.25
GBP/EUR by end of 2025
UK GDP growth downgraded, but only slightly
- We have downgraded our UK growth forecast, but only slightly, to 1.5% in 2025.
- The October Budget loosened fiscal policy as the government increased spending.
- Employers have warned of lower job creation due to National Insurance Contributions and minimum wage increases.
- Personal finances are still strong, in Q2 2024 there was 3.5% growth in average disposable income year-on-year. The household saving ratio of 10% stood at more than double pre-Covid levels.
UK GDP growth downgraded, but only slightly
- We have downgraded our UK growth forecast, but only slightly, to 1.5% in 2025.
- The October Budget loosened fiscal policy as the government increased spending.
- Employers have warned of lower job creation due to National Insurance Contributions and minimum wage increases.
- Personal finances are still strong, in Q2 2024 there was 3.5% growth in average disposable income year-on-year. The household saving ratio of 10% stood at more than double pre-Covid levels.
UK inflation could rise next year, but should subside quite quickly
- UK inflation could creep up to 3%, principally due to rising gas prices.
- Inflation should fall back close to 2% in Q4 as service sector inflation should continue easing.
UK inflation could rise next year, but should subside quite quickly
- UK inflation could creep up to 3%, principally due to rising gas prices.
- Inflation should fall back close to 2% in Q4 as service sector inflation should continue easing.
UK interest rates should fall, along with mortgage rates
- The Monetary Policy Committee looks set to continue to reduce interest rates gradually.
- We still expect 100 basis points of rate cuts over 2025, taking the Bank of England Bank rate to 3.75% by the end of the year.
- This is a lower profile for rates than markets are pricing in, which should allow mortgage rates to come down.
UK interest rates should fall, along with mortgage rates
- The Monetary Policy Committee looks set to continue to reduce interest rates gradually.
- We still expect 100 basis points of rate cuts over 2025, taking the Bank of England Bank rate to 3.75% by the end of the year.
- This is a lower profile for rates than markets are pricing in, which should allow mortgage rates to come down.
We expect a firmer US dollar, but a weaker euro
- We have lowered our forecast for sterling against the dollar as we expect the US Federal Reserve to cut US interest rates just once in 2025.
- Sterling could move higher against the euro as a weaker Eurozone GDP could see the European Central Bank cut rates to 1.5% by the end of the year.
- We still see upside possibilities for sterling, providing government policies to boost longer-term growth bear fruit.
We expect a firmer US dollar, but a weaker euro
- We have lowered our forecast for sterling against the dollar as we expect the US Federal Reserve to cut US interest rates just once in 2025.
- Sterling could move higher against the euro as a weaker Eurozone GDP could see the European Central Bank cut rates to 1.5% by the end of the year.
- We still see upside possibilities for sterling, providing government policies to boost longer-term growth bear fruit.
The impact of US tariffs on UK businesses might be limited
- While there is some uncertainty, President-elect Donald Trump could introduce tariffs of 10% on goods imported into the US.
- Goods account for 45% of total UK exports and 15% of UK GDP.
- 15% of goods exported go to the US.
- Retaliatory measures to tariffs are likely to be symbolic, to avoid boosting domestic inflation.
The impact of US tariffs on UK businesses might be limited
- While there is some uncertainty, President-elect Donald Trump could introduce tariffs of 10% on goods imported into the US.
- Goods account for 45% of total UK exports and 15% of UK GDP.
- 15% of goods exported go to the US.
- Retaliatory measures to tariffs are likely to be symbolic, to avoid boosting domestic inflation.
Important information:
This article is for general information purposes only. The opinions featured do not constitute financial or other advice. It is advisable to contact a professional adviser if you need financial advice. Your use of and reliance on any of this content is entirely at your own risk.
Want to know more about how the economy could affect you in 2025? Contact us today.
Read more global economy insights
Browse articles in