December 2024 Economic Review

The US labour market improved, with more jobs added in November than October, while the unemployment rate was little changed over the same period. Although preliminary figures showed the UK economy to have grown, the actual figures showed that there was no growth for the economy, posing doubts on the leadership of the current UK administration. The European Central Bank (ECB) lowered its key interest rates at its December meeting after a slowing inflation rate and to support the eurozone economy. This was also to moderate the degree of monetary policy restriction. The US Federal Reserve (US Fed) made its third rate cut for the year in December. Data showed that South Africa’s inflation edged higher in November but remains below the South African Reserve Bank (SARB)’s 3-6% target range.
US labour market improves
The Bureau of Labour Statistics (BLS) reported a US job creation rebound in November compared with October. This comes after non-farm payroll data showed an increase of 227 000 jobs in November, compared with an upwardly revised 36 000 jobs in October and the Dow Jones consensus estimate of 214 000. The sectors primarily contributing to the November job gains were healthcare (adding 54 000 jobs), leisure and hospitality (adding 53 000 jobs), and government employment (adding 33 000 jobs). Transportation equipment manufacturing added 32 000 jobs in November, reflecting the return of workers who were on strike. Employment in social assistance added 19 000 jobs in November. Employment declined in retail trade (reporting 28 000 job losses) and general merchandise retailers (reporting 15 000 job losses).
Source: CNBC, US Bureau of Labour Statistics
Investors are also wary of the jobs report revealing an overly strong economy, with a revival of inflation seen as one of the key risks to markets early in the year. According to the BLS, both the unemployment rate (at 4.2%) and the number of unemployed people (at 7.1 million) was little changed in November.
Source: CNBC, Bureau for Labour Statistics
Furthermore, the BLS reported a decline in household employment of 355 000 in November, even as the labour force contracted by 193 000. The labour force participation rate, measuring the share of the working age population either at work or looking for a job, declined to 62.5%. The number of people employed part time for economic reasons was little changed at 4.5 million in November. This measure is up from 4.0 million a year earlier. Full-time job holders decreased by 111 000 while part-time workers decreased by 268 000. At its December meeting, the US Fed raised its forecast for expected inflation in 2025, paving the way for higher interest rates than it previously forecasted.
UK economy flatlines in Q3 2024
Revised figures from the Office for National Statistics (ONS) showed that the UK economy failed to achieve any growth in the third quarter of 2024. A preliminary estimate published by the ONS said the UK GDP grew at 0.1% during that period, however, the final data released in December showed a 0% GDP growth from the previous quarter.
This marks another economic blow to Britain, after a series of weak data prints have dampened sentiment and raised questions about the newly-elected Labour government’s fiscal strategy. In October 2024, the country’s GDP fell by 0.1%, following a 0.1% fall in September. The Labour Party inheriting power from the Conservative administration is described by UK critics as being the worst in generations since it seems that the administration is failing at running the economy. Treasury Chief Rachel Reeves promised to boost economic growth after the Labour Party won the July election, however, the economy stalled in the third quarter of 2024.
Source: Office for National Statistics
Inflation, meanwhile, looks to be moving higher once again. The ONS said that UK inflation had risen to 2.6% year-on-year (y/y) in November, marking the second back-to-back month of an upward tick in prices. The Bank of England (BOE) subsequently kept its main interest rate unchanged at 4.75% at its December meeting. While BOE Governor Andrew Bailey has previously signalled four rate cuts for 2025, traders are divided over when the central bank will resume lowering interest rates. LSEG data showed that markets are expecting another hold at February’s MPC meeting, with a small majority of traders expecting rates to be cut by 25 basis points (bps) in March 2025.
For your interest
- Trump taps 13 billionaires for his administration
- President-elect Donald Trump has assembled the wealthiest presidential administration in modern history, with at least 13 billionaires set to take on government posts.
- In total, the combined net worth of the wealthiest members of his administration could surpass US$460 billion, including Department of Government Efficiency Co-Head Elon Musk. Even discounting Musk, Trump’s cabinet is still expected to be the wealthiest in history, with reported billionaires Howard Lutnick nominated as commerce secretary, Linda McMahon nominated as education secretary, and Scott Bessent nominated as treasury secretary.
(Source: ABC News, December 2024)
- Eurozone unemployment rate
- In October 2024, the eurozone’s seasonally adjusted unemployment rate was 6.3%, which was stable when compared with September 2024 and down from 6.6% in October 2023. The EU unemployment rate was 5.9% in October 2024, also stable compared with September 2024 and down from 6.1% in October 2023. These figures are published by Eurostat, estimating that 12.971 million persons in the EU, of whom 10.841 million are in the Eurozone, were unemployed in October 2024.
- Compared with September 2024, unemployment decreased by 70 000 in the EU and by 3 000 in the eurozone. Compared with October 2023, unemployment decreased by 416 000 in the EU and by 411 000 in the eurozone.
(Source: Eurostat, December 2024)
- ISM Manufacturing PMI beats expectations
- The ISM Manufacturing Purchasing Managers’ Index (PMI) for the US increased to 48.4 in November from 46.5 in October, beating forecasts of 47.5. The reading pointed to another, albeit softer, contraction in the manufacturing sector.
- New orders rebounded after seven months of contraction (50.4 vs 47.1) and production (46.8 vs 46.2), employment (48.1 vs 44.4) and inventories (48.1 vs 42.6) contracted less. Also, price pressures eased (50.3 vs 54.8) and the Supplier Deliveries Index indicated faster deliveries (48.7 vs 52).
(Source: Trading Economics, December 2024)
- ECB cuts interest rates again
- The ECB decided to lower the three key interest rates by 25 bps. In particular, the decision to lower the deposit facility rate – the rate through which the Governing Council steers the monetary policy stance – is based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission.
- Accordingly, the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility decreased to 3.00%, 3.15% and 3.40% respectively, effective 18 December 2024.
(Source: European Central Bank, December 2024)
- US Fed makes a third consecutive rate cut
- At the December Federal Open Market Committee (FOMC) meeting, the Fed lowered interest rates by 25 bps. This lowered the target interest rate range to 4.25-4.5% and reflects the Fed’s ongoing commitment to achieving its dual goals of maximum employment and price stability.
- The Fed’s decision marks a third consecutive rate cut, following a 25-bps reduction in November and a more aggressive 50 bps reduction in September.
(Source: JP Morgan, December 2024)
- SA inflation edges higher in November
- The annual inflation rate in South Africa rose to 2.9% in November, slightly up from a four-year low of 2.8% in October. This marked the first increase in consumer inflation after five consecutive periods of easing, though it remains well below the SARB’s preferred midpoint target of 4.5%.
- The annual core inflation rate – excluding food, non-alcoholic beverages, fuel, and energy – eased to 3.7%, its lowest level since February 2022, and down from 3.9% in October. On a monthly basis, consumer prices were unchanged in November, following a 0.1% decline in the previous period.
(Source: Statistics South Africa, December 2024)
SA business activity slips into contraction
South Africa’s private sector activity contracted in December for the first time since August 2024 because of muted demand and rising inflationary pressures weighing on growth. The S&P Global South Africa Purchasing Managers’ Index (PMI) fell to 49.9 in December from 50.9 in November, slipping below the 50.0 threshold that separates growth from contraction. New orders stalled, ending a four-month growth streak, as subdued market conditions and a further decline in export business dampened sales. Inflationary pressures intensified, with input costs rising at the fastest rate in four months, driven by higher wages and increased material and transport prices. However, the rate of inflation remained below long-term trends.
Despite the downturn, supply chain pressures eased, encouraging firms to increase input purchases for the third consecutive month. Employment remained stable, following a slight increase in November, while output and sales contracted across most sectors, particularly in construction. The services sector, however, showed a slight uptick in new work. Overall, the PMI’s fourth quarter average of 50.5 was the strongest since third quarter in 2022, providing some optimism for gross domestic product growth recovery after a contraction last quarter.
Market overview
Global overview
Developed market (DM) equities had a poor end to the year with the MSCI World Index ending negatively at -2.61% month-on-month (m/m) in dollars. However, equity investors enjoyed a good year of returns compared with the monthly figure since the MSCI World Index returned 18.67% y/y. The Magnificent Seven defied the December gloom, performing well enough to push the Nasdaq 100 into positive territory for the month. Emerging market (EM) stocks fared better than their DM peers in December, with the MSCI EM Index ending at -0.09% m/m, but significantly underperformed their DM peers over a longer period at 8.02% y/y. Global bonds were in negative territory, at -2.15% m/m, as was global property, at -6.93% m/m, both in dollars. The FTSE Index was negative at -1.16% m/m in pounds, along with the S&P 500 which ended negatively at -2.39% m/m in dollars. The Dow Jones Index ended the month with a -5.13% loss in dollars. However, both the Euro Stoxx 50 and the Nikkei posted gains of 1.95% m/m in euros and 4.52% m/m in yen terms respectively.
Local overview
South African equity markets suffered a third consecutive monthly decline with the FTSE/JSE All Share Index ending at -0.29% m/m in rand terms. The index takes a bit of the shine off an otherwise strong year for the local market. JSE-listed stocks with earnings geared predominantly towards the local economy had a marginally positive December, ending the year strongly. Industrials were in positive territory at 1.37% m/m, however, Resources and Financials were in negative territory at -5.43% and -1.24% m/m respectively. Property was positive for the month at 0.41%. Cash ended in positive territory for the month, at 0.66%. The FTSE/JSE All Bond Index was negative at -0.35% m/m. Bonds of 1-3 years and bonds of 3-7 years were both in positive territory at 0.47% and 0.20% m/m respectively. Bonds of 7-12 years and bonds of 12 years and above were both in negative territory at -0.24% and -0.94% m/m respectively. The rand struggled in December, ending the month at -4.27%, -2.36% and -2.85% against the US dollar, euro and pound respectively.
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