Global GDP, a key measure of economic activity, has been slowing as trade restrictions and policy uncertainty have weighed on growth. In 2025, we expect global GDP to grow by 2.3 percent-a significant downgrade from earlier forecasts.
GDP measures the monetary value of all final goods and services produced in a country during a period of time. Purchasing power parity (PPP) converts the data to a common international currency and allows direct comparison of economies.
The three components of GDP are C (consumer spending), I (investment spending) and X (exports). Unlike income, which includes all transactions between citizens and companies, GDP only counts expenditures on final goods and services. This excludes activities such as baking a loaf of bread for one’s own consumption, because it is counted twice: once when a baker buys ingredients and again when he sells the bread. Similarly, buying bonds and companies’ equity shares does not count because it is a swap of deeds rather than an expenditure on products; however, building a factory or purchasing equipment does.
A faster-than-expected global disinflation would boost household demand and consumer spending, while a sharp decline in energy and food prices should lift investment. However, the global economy is highly interconnected, and a number of factors have impacted growth this year. The most notable have been the re-emergence of COVID-19 deaths and lockdown restrictions, as well as changing US trade policy. Depending on the size of any new trade restrictions, these could subtract 0.4% or more from global growth.