What Are the Real-World Impacts of Global Economic Trends?
During the November Market Pulse webinar, our panelists analyzed 2024 global economic trends.
AC Cutts & Associates President and Chief Economist Amy Crews Cutts shared a macroeconomic update. Afterward, she was joined by Equifax Risk Advisor Maria Urtubey and Equifax Vice President of Advanced Analytics Rebecca Oakes, who led a discussion around the key economic items to consider in 2025.
Macroeconomic Observations and Updates with Amy Crews Cutts, AC Cutts & Associates¹
Inflation is easing, but challenges persist as the federal budget faces a December 2024 expiration. Meanwhile, two devastating hurricanes have left billions in damages, straining recovery efforts. Despite the Federal Reserve cutting the federal funds target rate, many market rates have climbed. However, a glimmer of optimism shines through as consumers spend big this holiday season.
Conflicting Consumer Sentiment
Although consumer sentiment is down, there is an indication the motivation could be something other than the economy, such as world events. Global supply chains are also affected by world events, and shipping prices, while far from normal, are coming down. The good news is consumers seem happy to spend when it comes to the holidays.
Federal Policy Going Forward
Heading into the September meeting, professional economists and bond market traders aligned on expectations for Federal Reserve rate cuts. Both groups anticipated around a 2 percent reduction in the federal funds target rate by the end of the year, with incremental 25-basis-point cuts expected at each Fed meeting. The Fed’s recent 50-basis-point cut suggests they are unlikely to reverse course soon, and future decisions will likely depend on incoming economic data.
The Flattening Yield Curve
In a normal economy, short-term borrowing typically has low interest rates due to minimal repayment risks, while long-term borrowing costs more. However, the U.S. has experienced an inverted yield curve for about two years, where short-term borrowing rates (e.g., one-month Treasury at 5.4 percent) exceed long-term rates (e.g., five-year Treasury at 3.65%), indicating economic irregularities.
Recently, the yield curve between two-year and ten-year bonds went uninverted, leading to optimistic headlines. However, historically, an uninverted yield curve often precedes an economic downturn. While the Federal Reserve is working toward a "soft landing," the continued inversion of the three-month and ten-year Treasury yields suggests lingering economic uncertainties.
For the full presentation with complete insights, make sure you are signed up for the Market Pulse webinar each month.
Discussion on Year-End Updates and 2025 Forecasts²
As global inflation eases and unemployment rises, countries like the U.S., Australia, and the UK share similar trends with Canada. However, Canada's GDP per capita lags due to population growth. For detailed comparisons, explore the Equifax Global Insights reports, featuring delinquency and product-level growth by country.
Additionally, our experts shared four trends to follow throughout the beginning of 2025.
Trend #1: Pay Attention to Interest Rates
We know lower interest rates can provide relief for consumers with high-balance, variable-rate credit products; they can also help small businesses access affordable financing, potentially stimulating growth. While these events could increase credit opportunities for lenders, significant financial stress persists in some population segments across countries. Therefore, we still need to be aware of the delicate balance between fostering growth and managing ongoing risks.
Trend #2: Regional Changes Influence Economic Trends
Despite overarching global patterns, regional trends are significant. For instance, recent U.S. elections might impact global trade through potential tariff changes, while ongoing global instability affects individual countries differently. In Canada, rapid population growth has boosted GDP and spending, but concerns about unsustainable growth have led to discussions about reducing immigration. These regional nuances call attention to the importance of considering local dynamics alongside broader trends.
Trend #3: Small Business Health
Nearly half of the private labor forces in Canada, the U.S., and Australia are small businesses, so their health is crucial. Struggles in this sector could signal risks to employment, which may have broader implications for consumer credit and financial stability.
Trend #4: Fraud on the Rise
As technology and AI advance, fraudsters are increasingly using these tools to commit fraud, leading to rising fraud levels. Synthetic identity fraud is a growing concern in the U.S. and Canada, so developing advanced strategies to combat fraud is essential to mitigate losses and maintain financial security.
Stay in the Know
To receive the full experience and detail from the Market Pulse webinar, you have to be there. We hope you will join us for our December Market Pulse webinar taking place on Thursday, December 5, 2024, when we will analyze 2024’s economic outcomes.
You can find our monthly Small Business Insights, National Consumer Credit Trends reports, the Market Pulse podcast, and more at our Market Pulse hub.
Questions? Reach out at riskadvisors@equifax.com.
Finally, connect with us on YouTube and LinkedIn for even more content to help you focus on forward.
Sources:
Amy Crews Cutts, President and Chief Economist, AC Cutts & Associates 2024
*The opinions, estimates, and forecasts presented herein are for general information use only. This material is based upon information that we consider to be reliable, but we do not represent that it is accurate or complete. No person should consider distribution of this material as making any representation or warranty with respect to such material and should not rely upon it as such. Equifax does not assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice. The opinions, estimates, forecasts, and other views published herein represent the views of the presenters as of the date indicated and do not necessarily represent the views of Equifax or its management.
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