27 September 2024
Summary
Read the full report
This week we look at four critical issues:
China: authorities try to lift confidence ahead of the 75th anniversary
The PBOC’s super package includes measures for policy rates and liquidity, the property sector and the stock market, as well as unexpected guidance on future policy moves. But more will be needed to lift domestic confidence from the doldrums, notably further fiscal spending, which this week’s Politburo meeting suggests should be forthcoming. The economy should end up close to this year’s official growth target of “around 5%” but risks still remain on the downside. For 2025, risks to our forecast (+4.3%) may be on the upside.
Quarterly country and sector risk changes: normalization complete
We have upgraded 14 countries, reflecting the ongoing recovery in economic outlooks. But the road ahead remains uneven as protectionist policies and geopolitical tensions remain. As for sectors, we found a limited improvement in the risk outlook, with nine moving up and five moving down. Downgrades occurred in all regions, mostly from medium to sensitive risk, especially in the automotive sector due to negative developments in Germany and Switzerland, as well as retail in China due to the weak outlook for Chinese consumers.
Durable goods: poised for a rebound in 2025
After the great reopening of 2021, a pronounced slowdown followed in both in 2022 and 2023, due to saturation effects, exacerbated by higher interest rates. Sales should remain sluggish in 2024 in Germany (+2%), France (+3%), the US (+2%) and Italy (5%), with a slight slowdown in the UK (-1%). But five factors set the stage for a strong recovery in 2025: (i) financing costs are coming down; (ii) consumers are moving away from expensive services; (iii) goods purchased in 2021 will soon need to be replaced; (iv) technological innovation will spur demand, notably for AI-powered devices and (v) supply-chain disruptions are also easing.
The great loosening cycle: central banks must balance FX, inflation and growth
The Fed’s jumbo cut is an important tailwind for the global FX market after years of volatility and widespread depreciations vs. the USD. But the path ahead is not so clear. We find four clusters of countries with different priorities: 1) emerging Europe, Chile and Colombia (boosting growth without overlooking inflationary pressures). 2) Most advanced economies in Europe, China and Thailand (boosting growth but fewer inflationary pressures). 3) Most of Asia, the rest of Latin America, South Africa and Norway (weak exchange rates and financial stability concerns will slow the pace of easing). 4) Large African economies, Türkiye and Argentina (restoring confidence in the exchange rate and bringing down inflation). Switzerland and Japan stand out as two countries where intervention may be required to manage appreciation pressures.
Authors
Ano Kuhanathan
Allianz Trade
Allianz Trade
Luca Moneta
Allianz Trade
Allianz Trade
Yao Lu
Allianz Trade
Françoise Huang
Allianz Trade
Allianz Trade
Subscribe to our newsletter
Weekly on Allianz markets, macro, sector & insurance research by Ludovic Subran
You may also be interested in...
Our expertise and commitment
Allianz Trade is the global leader in trade credit insurance and credit management, offering tailored solutions to mitigate the risks associated with bad debt, thereby ensuring the financial stability of businesses. Our products and services help companies with risk management, cash flow management, accounts receivables protection, Surety bonds, business fraud Insurance, debt collection processes and e-commerce credit insurance ensuring the financial resilience for our client’s businesses. Our expertise in risk mitigation and finance positions us as trusted advisors, enabling businesses aspiring for global success to expand into international markets with confidence.
Our business is built on supporting relationships between people and organizations, relationships that extend across frontiers of all kinds - geographical, financial, industrial, and more. We are constantly aware that our work has an impact on the communities we serve and that we have a duty to help and support others. Everyone at Allianz Trade is encouraged and supported in giving back to communities around them and sharing the benefit of our skills and resources. As a financial services business, we are especially dedicated to raising the level of financial literacy through our business Tips & advice so that individuals can live their lives in confidence and security. We are also strongly committed to fairness for all, without discrimination, among our own people and in our many relationships with those outside our business.