As we begin 2025, our team of economists in the Capital Strategy Research (CSR) team highlight areas where their outlook is different from consensus.

Among CG economists, our outlook for US growth is broadly more optimistic than the consensus, for example, with expectations of higher inflation and higher rates. Consensus on real GDP growth for 2025 is slowing to a modest, yet still positive pace and Capital Group economists forecast a reacceleration, predicting a growth rate of 2.7% for 2025 and between 2% and 2.5% for 2026.

There is a broad agreement that the rise in the unemployment rate in 2024 has been supply-led, and Wall Street firms broadly anticipate a continued slowdown in jobs and hiring with waning demand. With these outlooks, it is unsurprising firms expect consumer spending to decelerate. However, our analysis suggests the unemployment rate should be falling, not rising, owing in part to the strength of corporate earnings and continued investment, and that real income growth should continue to support consumer spending growth.

On Europe, meanwhile, consensus expectations are for softer labour markets and tighter fiscal policy to pull down services inflation; our Europe economists are more cautious on the potential drop in inflation and feel it could be slower to return to central banks’ 2% targets.

Within ASEAN markets, our Asia specialist is more bullish than consensus on Malaysia, believing the country could be well positioned to benefit from the secondary effects of Trump’s proposed tariffs.

Overall, while markets were confident inflation was tamed last year, pockets of rising prices could appear near-term as investors digest uncertainty around trade and fiscal policy under the new presidential administration. Still, US economic strength remains front-and-centre, carrying global growth.

Areas such as Europe and China face ongoing growth hurdles, coupled with potential tariffs and a strong dollar. We estimate interest rates could remain high, though may settle around 4%. However, the US Federal Reserve will have to weigh any potential impacts of tariffs. Above all, we will be eyeing any signals that the economy is slowing.