Robust U.S. Economic Growth, Fed's Interest Rate Policy Likely to Remain Steady
According to economists, the U.S. gross domestic product (GDP) is expected to grow at an annualized rate of 2.7% in the fourth quarter of 2024, showing strong consumer spending and a robust labor market. Previously, the U.S. economy achieved about 3% growth for two consecutive quarters, solidifying its leading position in the global economy. Compared to the weak growth of Europe and other developed economies, the U.S. economy stands out significantly.
Fed Policy Expectations: Maintain Stable Rates, Possibly Only Two Rate Cuts
Among the economic data due this week, the U.S. economic activity report is particularly noticeable. The market generally expects the Fed to maintain stable borrowing costs amid strong demand and persistent inflation. In December 2024, Fed policymakers hinted that there might only be two rate cuts this year.
Personal consumption is the core driver of U.S. economic growth. It is estimated that U.S. personal consumption will maintain an annualized growth rate of over 3% for the second consecutive quarter in the fourth quarter. This robust consumption performance not only supports the U.S. domestic economy but also further widens the gap with other economies such as Europe.
Weak European Economy: France Stagnant, Germany Possibly Contracting
In sharp contrast to the U.S., major European economies are underperforming. Data to be released this week is expected to show that French economic growth stalled in the fourth quarter of 2024, and the German economy may have contracted. The overall growth rate for the Eurozone is projected to be just 0.1%, continuing a trend of weakness in recent years.
As for European Central Bank policy, the Governing Council will hold the year's first policy meeting on Thursday, expected to cut rates by 25 basis points. This decision reflects policymakers' response to regional economic weakness and also suggests a relatively optimistic view of inflation pressures.
Global Economic Divergence: U.S. in the Lead, Asia Relatively Calm
Globally, economic performance shows a divergent pattern. In Asia, while overall economic activity is relatively calm, economic data from Japan is drawing attention. Last Friday, the Bank of Japan announced a rate hike to its highest level in 17 years. A series of economic data will be released this week, including service prices, consumer confidence, unemployment rate, and industrial production, further reflecting Japan's economic performance post-rate hike.
Meanwhile, Australia, New Zealand, and the Philippines will also release key economic data. The Philippines' fourth-quarter GDP is expected to be faster than the previous three months, showing some growth momentum.
Other Regional Dynamics: Many Countries Adjust Monetary Policies
In other regions, monetary policy adjustments are in focus. This week, South Africa and Sweden will face monetary policy decisions, with the Swedish central bank expected to cut rates by 25 basis points to 2.25%, while South Africa may cut rates for the third consecutive time. Meanwhile, Nigeria and South Africa plan to adjust inflation and GDP benchmark data to provide a more accurate basis for policy decisions.
Impact of Fed Policy on Global Economic Trends
Overall, the strong growth of the U.S. economy and the Fed's interest rate policy will continue to have a significant impact on the global economy. Despite Europe's economic weakness and the recovery challenges in some emerging markets, the robust U.S. consumer and labor market may provide some stability to the global economy. Investors will closely watch the data released this week to gauge economic trends at the start of 2025.
