Take Two: Trade growth expected to double in 2024; Bank of England signals rate cuts
- 13 May 2024 (3 min read)
What do you need to know?
The combination of a strong US economy and easing inflation could see global trade growth more than double in 2024, though it will remain below pre-pandemic levels, according to a Financial Times report. The Organisation for Economic Co-operation and Development predicts global trade will rise 2.3% this year and 3.3% in 2025, compared to 1% growth in 2023. However, trade volumes grew at an average annual rate of 4.2% between 2006 and 2015, according to International Monetary Fund data. Meanwhile China’s imports exceeded expectations in April, climbing 8.4% year-on-year while exports rose 1.5%, after both fell on an annual basis in March.
Around the world
The Bank of England left its benchmark interest rate unchanged at 5.25% but Governor Andrew Bailey said the cost of borrowing could fall faster than the market currently expects. He said easing was “likely” over the coming quarters, “possibly more so than currently priced into market rates”. Seven Monetary Policy Committee members voted to hold rates steady, while two preferred a 25-basis-point (bp) cut. AXA IM expects three 25bp cuts this year, most likely starting in June. Rate cut hopes helped buoy markets including the FTSE 100 and Europe’s Stoxx 600 to record highs. Meanwhile UK GDP grew 0.6% in the first quarter (Q1), taking it out of recession.
Figure in focus: 52.5
Growth across China’s service industry eased back slightly during April although its still-solid performance meant it enjoyed its 16th consecutive month of expansion. The Caixin/S&P Global services Purchasing Managers’ Index (PMI) edged down to 52.5 from 52.7 in March – a reading above 50 indicates expansion. The sector was partly bolstered by an acceleration in new export orders, which rose at their fastest rate in 10 months. However, the pace of growth eased slightly partly due to rising costs. The composite PMI, which combines both services and manufacturing sectors, rose at its fastest pace in almost a year, nudging up to 52.8 in April from 52.7 in March.
Words of wisdom
Global Electricity Review: An annual report by think tank Ember that analyses changes in global electricity generation and the likely implications for energy sources and emissions in the near future. Its latest report found renewables generated a record 30% of global electricity in 2023, driven by record construction in solar and wind power. Another analysis from the International Energy Agency (IEA) found that spending on solar photovoltaic (PV) manufacturing more than doubled last year, while investment in battery manufacturing rose by around 60%. As a result, the IEA believes solar PV module manufacturing capacity is in line with what’s required in 2030 based on its net zero emissions scenario.
What’s coming up?
On Tuesday, the UK reports its unemployment figures for March while the latest Eurozone ZEW Economic Sentiment Index – which reflects expectations of the bloc’s six-month economic outlook – is also released. On Wednesday, the Eurozone issues its Q1 employment and GDP growth numbers while the US announces inflation figures for April. On Thursday, Japan releases Q1 GDP growth data while the Eurozone publishes its latest inflation figures on Friday.
Disclaimer
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales, No: 01431068. Registered Office: 22 Bishopsgate, London, EC2N 4BQ.
In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.
Risk Warning