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Global Inflation Tracker Q1 2024: Divergent Trends Persist Amid Lower Overall Inflation

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Global inflationary pressures are forecast to moderate further in 2024.

Under the baseline scenario, global inflation is forecast to stand at 5.4% in 2024 and trend down further to 3.6% in 2025

Source: Euromonitor International

Lower energy prices, slower consumption growth and normalisation of manufactured goods prices are contributing to lower inflationary pressures. However, divergence among countries remains. Advanced economies are forecast to witness weaker inflationary pressures in 2024 thanks to the softer price growth of services and weaker inflationary pressures on the commodities supply side. Emerging markets, on the other hand, are forecast to face stronger price pressures in 2024 due to higher vulnerability to commodity price shocks.

Supply-side cost pressures remain the key upside risk for inflation in 2024. Ongoing shipping disruptions in the Red Sea could impact a broad range of Asian, Middle Eastern and European countries that rely on this trade route. Prolonged shipping disruptions would largely impact European manufacturing and B2B sectors and cause temporary shortages of certain goods or components, in turn adding to the higher price pressures of manufactured goods in the eurozone.Chart showing Global Consumer Price Inflation Baseline Forecast 2022-2026

Services inflation to ease slightly in 2024 as economic growth stalls

Inflationary pressures from the services sector are forecast to ease slightly in 2024 and contribute to lower core inflation (excluding food and energy price fluctuations).

Slower economic growth in the largest economies and consequently weaker job creation are expected to cap some of the inflationary pressures on services

Source: Euromonitor International

On the demand side, inflationary pressures in the services sector are also forecast to ease in 2024 as high interest rates and weaker economic growth are forecast to squeeze consumer finances. In response, consumers are expected to become more cautious about their spending on discretionary items, such as restaurants, leisure and entertainment services.

However, long-term pressures in the labour market will prevail due to the ageing populations in the largest economies and lower labour market participation rates. Increasing need to invest into automation of business activities in the higher interest rate environment will also inflate operating costs for companies and add to long-term price pressures.Chart showing Unemployment Rate in Selected Countries Q1 2021-Q4 2024

Weak income growth and high prices of essentials to constrain consumer spending

Consumer spending is forecast to slow down in 2024 as a result of weaker income gains and ongoing cost-of-living crisis. The global disposable income per capita is forecast to grow by 1.1% in real terms in 2024. Slower global economic growth will constrain faster labour market and wage growth.

Consumers proved to be resilient to the pandemic and inflationary shocks thanks to savings accumulated during lockdowns and resilient labour markets. However, these effects are expected to wane and lead to the weaker demand in 2024. Consumer expenditure on discretionary services is forecast to grow at a slower rate in 2024 as consumers remain pressured by the higher prices of essential items.Chart showing Source: Euromonitor International from national statistics Note: Essential spending includes consumer expenditure on food and beverages, housing, apparel and footwear

Inflation continues to moderate across the largest economies

Slower economic and demand growth and tight monetary policies, to a large extent, help to ease inflationary pressures in the largest economies. Advanced economies are forecast to see a faster decline of inflation in 2024 thanks to stabilisation of energy prices and weaker inflationary pressures in the services sector. Most emerging economies, on the other hand, will continue to feel high inflationary pressures in 2024.

  • Inflation in the US is projected to slow to 2.7% in 2024 and 2.3% in 2025. Tighter monetary policy, to a large extent, helps to cool down the economy and ease price pressures. However, the further disinflation process is likely to be slower due to the tight labour market, indicating that tighter monetary policy could last longer.
  • China’s annual inflation rate is forecast to average 1.1% in 2024 and 1.7% in 2025, reflecting the ongoing deflationary pressures. This trend also underscores the challenges of lowering consumer confidence and slowing economic activities confronting the Chinese economy.
  • Inflation risks in the eurozone are forecast to remain moderate in 2024-2025 as weaker economic growth and stabilisation of energy prices help to cap price increases. Inflation in the largest eurozone economies, Germany and France, is forecast to reach 2.8% and 2.5%, respectively, in 2024. However, supply-side inflationary risks due to geopolitical tensions and transportation disruptions could result in temporary price increases in 2024.
  • Inflation in the UK is forecast to slow down to 3.1% in 2024 and reach 2.1% in 2025. Slower economic growth and stricter monetary policy are helping to ease price pressures; however, services inflation remains sticky due to the tight labour markets. Slow economic growth and tight labour markets will also make it harder for the Bank of England to balance its monetary policy in 2024 to avoid keeping the interest rates too high for too long.
  • Inflation in India is forecast to trend down to 4.8% in 2024 and stand at 4.3% in 2025. However, energy and food price volatility remain the key risks to price stability in India. Food prices have been playing a particularly important role. While export curbs placed on wheat, rice and sugar until the end of 2024 are set to support sufficient domestic food supply and help control prices, weaker output due to unfavourable weather conditions could add to higher prices.Graphic showing key country insights

Further insights into key economic and inflation trends are available at Global Inflation Tracker Q1 2024 and Global Economic Forecasts Q1 2024.

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