12 December 2024
Summary
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In summary:
Companies on a trade war footing
Despite a brief boost as exporters rush to get in orders before higher tariffs kick in, global trade growth is likely to slow in 2025-2026. We now expect global trade in volume to grow by +2.8% in 2025 (-0.2pp from our previous forecast) and +2.3% in 2026 (-0.5pp). In USD value terms, the downside revisions to our forecasts are even larger, with growth reaching +2.3% in 2025 (-1.7pp) and +4.1% in 2026 (-0.8pp). Marine cargo and trade data confirm that exporters are frontloading shipments (Chinese exports were up +6.7% y/y in November, supported by orders from the US (+8% y/y)) and air cargo is also skyrocketing (+9.8% y/y in November). Ultimately, factors such as FX adjustments and upcoming free-trade agreements may bring a little relief to global trade but they are unlikely to neuter the impact of the renewed trade war.
Though a close call, we think the Fed will deliver its third consecutive rate cut next week. Since June, measures of underlying inflation have remained stuck at around +3.3/3.2% y/y and have even accelerated on a sequential month-on-month basis. At the same time, the unemployment rate is picking up, though primarily driven by strong labor force growth rather than weakening job growth. Persistent inflation and wage pressures suggest that the natural rate of unemployment may be a bit higher than the Fed’s current estimate of 4.2%. In this context, we think the Fed will eventually have to accept a higher unemployment rate to tame inflation. Looking ahead, tight immigration policy and tariff hikes could increase inflationary pressures in 2025. We thus expect the Fed to pause rate cuts at the January meeting, before delivering a final 25bps cut for the year in March, pushing the Fed funds rate to the 4-4.25% range.
2024 going in the books as a record year for insolvencies
Insolvencies of companies with over EUR50mn in turnover hit a new record high in Q3 2024 at 127 cases, +17 compared to Q2 2024 and +42 compared to the pre-pandemic average of 82 over 2017-2019. Additionally, the combined turnover of insolvent major companies has increased by +48% y/y to EUR40bn. Western Europe leads the rebound in the number of cases, but the Americas are home to the biggest cases. In terms of sectors, services and retail have been hit the hardest, particularly in Western Europe and North America, along with construction, especially in Western Europe and Asia. With 344 cases recorded in the first three quarters, this year's total of major insolvencies already exceeds those for 2015 to 2019, 2021 and 2022. Lingering economic uncertainty, structural changes in sectors and the reshaping of supply chains and global trade could certainly push the final count of major insolvencies to a new record in 2024, raising the risk of a domino effect on suppliers and subcontractors.
Authors
Maxime Darmet
Allianz Trade
Allianz Trade
Françoise Huang
Allianz Trade
Allianz Trade
Maxime Lemerle
Allianz Trade
Maria Latorre
Allianz Trade
Allianz Trade
Philippine Renaudie
Allianz Trade