Beijing's stimulus measures have led to an uptick in most commodity prices. However, oil has been an exception due to reports of Saudi Arabia planning to boost production.
In the first half of 2024, global economy has demonstrated notable resilience, with the OECD reporting an annualised growth rate of 3.2 percent. This growth has been significantly supported by a decline in consumer price inflation, which has enhanced household spending. This increase in consumer expenditure has effectively countered the adverse effects of tighter financial conditions and the uncertainties arising from the ongoing conflict in Ukraine, as well as the evolving situations in the Middle East. As we progress through the year, global growth is expected to stabilise at this rate of 3.2 percent for both 2024 and 2025. The effects of previous monetary policy tightening in advanced economies are beginning to moderate, allowing for potential easing in the future. This easing, coupled with a decline in inflation is expected to support real income growth, providing a tailwind for private consumption across various economies.
Focusing on the United States, economic activity has gained considerable momentum in the second quarter due to rising real wages facilitated by lower inflation. However, forecasts indicate a potential deceleration in growth, with real GDP expected to expand by 2.6 percent in 2024 and further slow to 1.6 percent in 2025. Other advanced economies, including Canada, Spain, and the United Kingdom, have also reported solid GDP growth figures. However, recent developments in economies like Germany have been less encouraging. Europe is expected to benefit from reductions in policy rates and a recovery in real incomes, with euro area growth projected at 0.7 percent in 2024 and 1.3 percent in 2025. Japan's overall growth for 2024 is slightly negative at -0.1 percent due to a weak first quarter, but strong real wage gains are anticipated to drive a recovery, with growth of 1.4 percent projected for 2025. In Australia, economic growth is expected to rise from 1.1 percent this year to 1.8 percent in 2025, bolstered by an increase in household consumption linked to higher real disposable incomes.
Emerging market economies present a mixed bag of growth prospects. Countries like Brazil, India, and Indonesia are experiencing strong growth, propelled by robust domestic demand. On the other hand, Mexico is confronting a slowdown. China’s growth continues to be supported by its export sector, but sluggish consumer demand and ongoing challenges in the real estate market are significant obstacles. The GDP growth for China is expected to be 4.9 percent in 2024, tapering slightly to 4.5 percent in 2025. Meanwhile, India is projected to maintain a healthy growth rate of 6.7 percent in 2024 and 6.8 percent in 2025. Indonesia is set to experience GDP growth of 5.1 percent in 2024, rising to 5.2 percent the following year, while Brazil is likely to maintain its positive momentum due to increased government spending.
While the global economy shows signs of stability amid various challenges, the recovery in global trade has continued through the first half of 2024, with noticeable growth in trade volumes for both goods and services, according to the OECD. A significant driver of this resurgence has been the uptick in US import growth, partly fueled by increased investment in equipment. Additionally, enhanced trade dynamics in key emerging markets –such as China, various Asian economies, Brazil, and India – have contributed to the unexpected resilience of trade flows. However, there are indications that orders are starting to weaken again, suggesting that a portion of the trade boost experienced in mid-year may have stemmed from earlier-thanusual orders in advanced economies for the peak season. This proactive approach aims to mitigate potential congestion later in the year.
At this juncture, following the Federal Reserve's bold rate cut last week, China’s central bank has responded by lowering interest rates and injecting liquidity into the banking system. This move is part of Beijing's urgent effort to steer economic growth back towards its target of approximately 5 percent for this year. The stimulus package, which marks the largest since the pandemic, includes substantial funding from the central bank to bolster the stock market, along with policy rate cuts and measures aimed at enhancing bank liquidity. Notably, it also addresses China’s ongoing property crisis with a 50- basis point cut in mortgage rates. This stimulus initiative was accompanied by a strong declaration from China's politburo, which conducted what analysts described as an “emergency” meeting focused on economic issues. The politburo announced plans to ramp up fiscal spending to further support growth.
The introduction of these stimulus measures has led to an uptick in most commodity prices, although oil has remained an exception due to reports of Saudi Arabia preparing to increase production. Within the dry bulk market, segments have largely remained unaffected up to now by these developments, with only the Capesize segment experiencing a positive shift in sentiment as a result of the news.
Data source: Doric