Economies continue to face a range of geopolitical, climatic, and inflation-led challenges, with some also feeling the effects of structural issues. Against this backdrop, China, India, and the US are outperforming other surveyed economies.
Among developed economies, US GDP continues to eclipse European output. Real GDP in the US increased at an annual rate of 2.8% in the third quarter of 2024. In the second quarter, real GDP rose 3.0%. By comparison, growth in Europe was subdued. In the Eurozone, third-quarter GDP growth was 0.2% quarter on quarter, and 1% year on year. Real GDP growth is expected to be 0.8% in 2024 and 1.3% in 2025, according to the European Commission’s November projections. After prolonged stagnation, the EU economy started growing in the first quarter of this year, and growth continued at a steady but subdued pace through the second and third quarters, with inflationary pressures easing. In the UK, quarterly real GDP is estimated to have grown by 0.1% quarter on quarter in the third quarter of 2024 (after growing by 0.5% in the second quarter) and grew 1.0% year on year in the third quarter.
Commentators are assessing the impact of President-elect Trump’s return to the White House on the global economy. It is too early to tell how things will play out. Tariffs, and their likely effects on China, Europe, and the domestic US economy, have been a major issue for analysts. Analyses indicate that there would be some negative impact for the US, with a large rise in tariffs feeding inflation at home and an accompanying reduction in growth for all affected countries. A 60% tariff on Chinese goods, for example, which was suggested by President-elect Trump on the campaign trail, could significantly affect China’s economy (with manufacturing making up almost 40% of its GDP).
From a European perspective, a report by former Italian prime minister and European Central Bank (ECB) president Mario Draghi, The future of European competitiveness (published September 9), examines differences in competitiveness between the EU and other global economies. It identifies three main areas of action to reignite sustainable growth. Its principal conclusion is that Europe must “close the innovation gap with the US and China.” It states that inconsistent and restrictive regulations hinder, at every stage, innovative companies that want to scale up in Europe. The report also calls for a joint plan for decarbonization and competitiveness and for Europe to increase its security and reduce its dependency on other countries for defense and critical raw materials.
Unsurprisingly, GDP in emerging economies is somewhat higher than among developed economies but slowing. China saw industrial output growth stabilize in October, registering a 5.3% increase (5.4% in September). After a series of stimulus measures in recent months, China’s Ministry of Finance announced a five-year debt relief package in early November. The package is worth 10 trillion renminbi and aims to swap out existing hidden government debt.
India’s output has been expanding at a similar pace, with the economy growing 5.4% year on year in the third quarter. However, this represents a deceleration compared with the 7 to 8% growth seen in recent quarters. Nevertheless, the Reserve Bank of India remains optimistic, projecting GDP growth of 7.2% for the fiscal year ending March 2025. Russia’s wartime economy is now slowing, with growth forecasts for next year strongly dependent on levels of government support.
Meanwhile, in seeking to strike a balance between the risks of inflation and interest rates holding back their economies, the US Federal Reserve and Bank of England (BoE) kept cutting rates this month (Exhibit 1). At its November 7 meeting, the Federal Reserve’s Federal Open Market Committee (FOMC) opted to lower the target range for the federal funds rate by 0.25 percentage points to 4.50 to 4.75%. A day earlier, the BoE’s Monetary Policy Committee voted to cut its policy rate to 4.75%. By contrast, Brazil’s central bank raised the country’s benchmark Selic interest rate by half a percentage point to 11.25% in November. Meanwhile, in Russia’s wartime economy, persistent inflation pushed the Central Bank of Russia to raise its key rate to 21% in October, bringing cumulative tightening since June to 500 basis points. The bank also warned that it would raise rates again if inflationary pressures fail to abate, potentially in December.
Globally, consumers and producers continue to feel the pressure of high prices, even as inflation eases; final prices have increased by an average of 20 to 25% since 2019. Consumers remain cautious as new risks emerge. While consumption has been accelerating in some countries, this is still largely driven by prices, with real consumption still subdued. In the US, October’s consumer confidence index (Conference Board) increased to 108.7, up from September’s 99.2. Retail and food services sales for October (adjusted for seasonal variation and holiday and trading-day differences) were $718.9 billion—a 0.4% increase from September.
Inflation, though slightly elevated in most countries, remains mostly under control. Expectations around inflation have risen, but the outlook remains in the 2.0 to 2.3% band. In September, food prices were largely unchanged globally, at some 22% above prepandemic levels, but they are becoming the main driver of inflation in emerging economies.
Among the advanced economies, US consumers’ one-year-ahead inflation expectations at the one-year horizon dipped slightly to 2.9% in October (3% in September) and, at the five-year horizon, declined to 2.8%, from 2.9%, according to the September Survey of Consumer Expectations. Producer prices are accelerating in the US, while the consumer price index (CPI) rose 2.6% for the 12 months ending October, after rising 2.4% over the 12 months ending September. Core inflation rose slightly to 3.3% (annualized) in October. Headline inflation in the Eurozone was at par with the 2% target, mainly due to declining energy prices (–4.5%) in October, while core inflation stood at 2.7%. Services inflation was 4%, which still points to strong domestic price pressures. The UK CPI rose to 2.3% in October, with higher electricity and gas prices partially offset by lower prices for recreation and culture. UK CPI inflation is expected to rise to around 2.75% by the second half of 2024, as last year’s declines in energy prices fall out of the equation, according to the BoE’s November Monetary Policy Report.
Among emerging economies, China continues to battle deflation. CPI inflation has remained low, with the index registering a modest 0.3% in October, a slight dip from September’s 0.4%. However, producer prices posted a decline of −2.9% in October versus September’s −2.8%. India’s retail inflation surged to a 14-month high of 6.21% in October, up from 5.5% in September. This rise was largely driven by food inflation, which reached 9.7% year on year in October. In Brazil, inflation climbed to 4.76% in October (4.42% in September), increasing for the second consecutive time and breaching the central bank’s target upper limit (4.50%).
Commodity prices have generally remained stable, while the rush for gold continues amid heightened uncertainty. Gold holdings are traditionally seen as a convenient way for central banks to diversify their assets. Gold prices have surged by nearly 15% over the past three to four months, with the price per ounce up about 40% this year. Energy prices, in contrast, have been stable in November and continue to move sideways.
Both the manufacturing and services sectors maintained the status quo from the previous month, but risks within the manufacturing sector are rising due to lower consumer demand. Companies are reporting a fourth consecutive month of declining new-order intake. The services sector remained broadly stable, with stronger growth observed in China, India, and Russia.
In the US, the industrial production index declined slightly to 102.3 in October (102.6 in September). October’s purchasing managers’ index (PMI) for manufacturing was revised higher to 48.5 from a preliminary of 47.8, following a 15-month low of 47.3 in September. The seasonally adjusted S&P Global UK Manufacturing PMI posted 49.9 in October, down from 51.5 in September. This is the first time that the PMI has fallen below the neutral 50.0 mark since April. A lack of market optimism, slower economic growth, stretched supply chains, and concerns about the impact of the UK budget announcement drove the slowdown.
Manufacturing in emerging economies was more buoyant. In October, India’s manufacturing sector maintained its expansionary momentum, with the manufacturing PMI reaching 57.5. This strong performance was driven by robust demand for goods and steady production growth. Brazil’s manufacturing PMI fell slightly to 52.9 in October (53.2 in September), remaining above the neutral 50.0 mark for the tenth month running and indicating modest expansion. Despite falling, the latest reading was consistent with a solid pace of growth. However, Mexico continues to experience challenging business conditions. Driven by a prolonged decline in new business inflows, firms reduced production volumes, laid off workers, and trimmed their input purchases. October’s manufacturing PMI rose from 47.3 in September to 48.4.
Services in developed economies continue to be strong. In the US, the services PMI decreased slightly to 55.0 (55.2 in September) but remained in the expansion zone. UK service sector output also continued to expand in October, supported by another solid upturn in new work, but the rate of expansion eased for the second month running. At 52.0 in October, down from 52.4 in September, the headline UK Services PMI pointed to the slowest increase in output levels since November 2023—although it has remained in positive territory throughout each month since.
Similarly, the services sector expanded in India, with the services PMI increasing to 58.5, indicating healthy growth across multiple industries. October saw Brazil’s services PMI climb to 56.2 (from 55.8 in September). The latest rate of expansion was the second highest in 28 months (behind July), driven by positive demand trends and new business gains.
Unemployment rates have remained stable across most surveyed economies. In the US, the rate remained unchanged at 4.1% in October (3.5% in January 2020). In the UK, unemployment was estimated at 4.3%. China saw the overall surveyed urban unemployment rate drop slightly to 5.0% in October, down from 5.1% in September. The youth unemployment rate decreased to 17.1% in October, slightly down from 17.6% in September. In Brazil, the three-month moving average unemployment rate fell to 6.4% in September (6.6% in August), down for the sixth time this year and lower than the same period last year (7.7%). Mexico saw total unemployment drop by 0.02 percentage points in September, reaching 2.74%. During the same period, formal employment grew by approximately 91,000 workers, with the largest increases reported in the agriculture and social services sectors.
In the markets (Exhibit 2), equity indexes delivered a mixed performance in November. However, US stock markets shone with both the S&P 500 and the Dow Jones posting their biggest monthly gains of the year to date. Meanwhile, government bond yields in most economies have appeared to slow slightly over recent months.
Trade deficits widened in some economies. Overall, world trade volume fell 0.9% in September, with growth across all trade flows in emerging economies and exports in advanced economies. September saw the US trade deficit widen to $84.4 billion, its highest since April 2022. In contrast, eurozone trade bounced back to a €12.5 billion surplus, from €4.6 billion in August.
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 November 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.