November 1, 2024

Taylor St. Germain:
Hi everyone, my name is Taylor St. Germain with ITR Economics, and welcome to this edition of TrendsTalk. We at ITR are your apolitical and unbiased source of economic intelligence, and today I wanted to talk about the global economy.

We’ve been very US centric as we look at the last few episodes, so I wanted to take some time and step back and look at how some different regions of the world are performing, and what expectations are as we continue to look at 2025. I wanted to first start off with the overall World Industrial Production Index. So we look at US industrial production a lot, we’ve talked about that a lot on this podcast. We also have a similar benchmark for the globe, and that is World Industrial Production. And there’s some very close similarities, tight correlations when comparing the global index to the US index, as of course we make up the largest part of the global economy here in the US, but there are some differences to know.

Now, we find that when comparing the annual growth rate for the global economy to the US economy in terms of industrial production, there’s about a one-month lead time. So the global economy moves through cycles about one month in advance of the US economy. Not that unusual, not a big lead time by any means, but it’s an important difference to still acknowledge.

Now, what we see out of the most recent annual growth rate reading from World Industrial Production is that the globe is up about 1.4% year over year, that’s a positive 1.4%. When we look at the US index were down about minus 0 .2% at the time of this recording. So it is clear that the aggregate global index is outperforming the US. Now the trajectories though are very similar as we move forward. We do expect that as we move into 2025, the global economy is continuing to improve on that growth rate and seeing accelerating growth throughout 2025, which is very similar to what we see here in the US. Again, the global economy, just seeing slightly higher growth rates throughout that time.

And some of that has to do with some of the emerging economies that tend to grow a little bit quicker than the more developed economies around the world. So not a big surprise there, but again, from an overall trajectory, we have global growth. in 2025 and 2026 and we have growth in the US economy during those same years. Now, when we really pull apart that global index though, it is important to understand that there are still some differences in where this growth is occurring and where we expect that growth to continue as we look ahead to 2025.

Now, some of this data I’ll be referencing comes from our global at-a-glance dashboard, which is part of the core section of the ITR Trends Report. We forecast several regions around the world out over the course of a three year period of time. Now, similar to the US, there are some countries around the world that are in that mild negative territory as we talk here today. Again, the US is down about minus 0.2% year over year on industrial production. Canada, Western Europe and Eastern Europe are also in that negative territory. Canada it is down minus 0.7% compared to the year ago level. In Western Europe down 1.8%, that’s a minus 1.8% with Eastern Europe coming in at minus 1.1%. And again, those are all where the annual growth rates are today. So it’s not just the US industrial economy experiencing some of this mild weakness as we sit here today.

However, there are some countries and regions around the world that are positive. If we look at India industrial production, that’s up almost 6%. China is up 5.7%, Mexico 2.4%. So there are, it’s important to understand these different perspectives because there are regions that are performing better than others. But of course, given where we are late in 2024, the big question is, well, what does 2025 look like for the global economy and for a lot of these regions around the world? And the answer is, for the most part, 25 looks a lot better in terms of growth rate expectations than where we are in 2024.

So I mentioned Canada is in a mild negative territory. We expect Canada year over year to grow by 3.3% in 2025. So Canada moving from contraction to growth in 2025. And that’s also the case for both Western and Eastern Europe. Again, both of which are negative as we sit here today, but are likely to be positive north of 2%, 2.1% for Western Europe and 2.9% for Eastern Europe as we look at 25. So the global economy is expected to accelerate in 25. And a lot of these areas that are experiencing mild negativity will be transitioning from contraction to growth as we progress deeper into 2025. And even though we see countries like India and China slowing down a bit next year, the growth rates are still remaining positive and that’s good news for accelerating growth in the global economy.

So the reason I share this with you all here today is first off, the good news is in 2025, most of these headwinds will be at our back, they’ll turn into tailwinds and we will see industrial demand for most regions around the world in that positive territory in 2025. But again, it is important to take a regional perspective because not everything is equal, even though there’s a lot of growth in 2025, certain regions will grow at a faster pace than others. And that’s very important to acknowledge as we’re looking for areas of opportunity from a business standpoint.

So again, I’d say there’s largely good news and even though there’s still some mild negativity today, now is the time to be putting your plans in place so that you’re ready to take on all of this increasing global demand in 2025. Now that won’t come with its own set of challenges when it comes to supply chains and inflation and other benchmarks we watch closely, but I think everyone’s going to welcome an increase in demand as we find ourselves much busier as a globe as we look forward to 2025. So similar to the US, but there’s some differences to acknowledge. And again, now is really the time to put your growth plans in place so that you’re not turning away growth in 2025 and you find yourself in a position to be prepared and take on that growth.

We’ll keep you updated. I know there’s a lot going on around the world right now. Geopolitical concerns, trade concerns, and especially as we get on the backside of this election here in the US, we’ll continue to keep you updated with how these situations evolve.

But for now, I hope you enjoyed this information that I shared with you today. Please remember to like and subscribe to TrendsTalk wherever you listen to your podcasts. And I look forward to seeing you all in the next one. Take care for now.