Global PulsePoint

Overview of Conditions

Updated 07 August 2025:  As of August 2025, the global economy continues to tread a narrow path between cautious optimism and persistent uncertainty. The OECD maintains its forecast for global GDP growth to decline from 3.3% in 2024 to 2.9% in both 2025 and 2026, with the IMF reinforcing the need for long-term structural reform and fiscal resilience to restore confidence.

Capital mobility remains strong, underpinned by ongoing supply chain reorientation and policy stability in some regions. Yet the reintroduction of sweeping US tariffs on 1 August has reinserted friction into global trade flows. While bilateral arrangements with the EU and Japan have prevented escalation, they offer limited predictability highlighting a trend towards managed competition rather than multilateral consensus. Inflation remains stable in the US (2.7%) and the euro area (2.0%), while the UK has seen an uptick to 3.6%. China recorded mild deflation (-0.1%), with underlying weakness in consumer demand.

Bond and equity markets showed upward momentum, though investor sentiment remains sensitive to policy shifts. Labour markets are stable overall but showing early signs of softening across Europe and Asia. Despite the temporary easing of some trade tensions, the global system is transitioning into a structurally more fragmented environment. Business leaders will need to watch for ripple effects on investment flows, inflation patterns, and strategic risk calculations in the months ahead.

See below for more detail on current global business conditions.

Signals to Watch

• US-China tariff pause expiry mid-August may trigger renewed volatility in trade and capital markets.
• Central bank synchronisation is slipping, with diverging policy signals emerging between developed and emerging markets.
• Greenfield FDI momentum suggests long-term strategic repositioning continues despite short-term uncertainty.
• Labour markets softening in Europe and Asia could signal early demand-side pressure ahead of Q4.

Financial Conditions

In this section, we examine interest rates, inflation, and stock market performance in the Eurozone, UK, US and China using data from the European Central Bank, Federal Reserve, Bank of England and the Peoples Bank of China; and stock market performance using data from The Euro Stoxx 50, S & P 500, FTSE 100, and CSI 300.

Interest Rates & Inflation

The bottom line:

Central banks, with the exception of the Bank of England, held policy rates steady through July and early August, but signs of further future divergence are emerging. The ECB retained rates (main refinancing at 2.15%) to moderate wage-driven inflation. The Federal Reserve held at 4.25–4.5%, weighing inflation risks against weaker forward demand. The People’s Bank of China maintained rates at 3.0%, balancing growth targets with capital flight risks. However, the Bank of England lowered rates to 4% to primarily stimulate a stagnating labour market. The August US tariff reintroduction complicates the inflation outlook and may force central banks to reassess in Q4. Divergence in rate paths could amplify FX volatility and capital flow pressures.

Inflation remains relatively contained in the US (2.7%) and euro area (2.0%), while UK inflation has risen sharply to 3.6% amid persistent price pressures. China’s -0.1% CPI decline reflects depressed consumer demand, even as production stabilises. Looking forward, inflation paths may become more volatile as trade frictions feed into cost structures and currency dynamics. Central banks must now balance domestic conditions against imported inflation and global supply uncertainty signalling more cautious forward guidance into 2026. 

Source: Ibec Global original chart based on the latest monetary policy reports by the European Central Bank (MRO rate), Bank of England, the Federal Reserve, and the People's Bank of China.

Interest Rates (as of early August 2025) 

Source: Ibec Global original chart based on the Consumer Price Index Summary of the US Bureau of Labor Statistics; Eurostat; UK’s Office for National Statistics; China National Bureau of Statistics, Consumer Price Index.

Financial Markets

The bottom line:
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Equity indices rose through July and early August, supported by strong earnings and temporary trade stabilisation. The S&P 500 reached 6,345.06, buoyed by technology and capital inflows. Euro Stoxx 50 and FTSE 100 also gained on improved sentiment and steady monetary policy. The CSI 300 rose modestly to 4,113.49, amid hopes of trade normalisation. Still, equities remain highly sensitive to geopolitical developments especially tariff escalation, central bank divergence and FX instability.

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Bond Markets

Note: The German 10-year Bund is considered the Eurozone’s benchmark bond, valued for its strong role in ECB policy decisions as a key indicator of market conditions.

Source: Ibec Global original chart based on the stock prices of Euro Stoxx 50, FTSE 100, S&P 500 and CSI 300.

The bottom line:

Bond yields moved upward across major markets in July, reflecting cautious optimism and monetary stability. US yields climbed modestly on stronger-than-expected growth, while Eurozone and UK yields rose in response to firm inflation and fiscal concerns. In China, yields edged up as investors priced in modest supply-side gains. Global bond markets are adjusting not only to central bank policy but also to strategic political shifts particularly in early August, indicating that sovereign risk premiums may increasingly reflect geopolitics, not just macro fundamentals.

Labour Market

In this section, we examine unemployment rates in the Eurozone, UK, US and China using data from the US Bureau of Labour Statistics, Eurostat, UK's Office for National Statistics and the National Bureau of Statistics in China.

Unemployment Rates

Source: Ibec Global original chart based on the data from the US Bureau of Labor Statistics; Eurostat; UK’s Office for National Statistics; National Bureau of Statistics of China.

The bottom line:
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Labour markets remain generally stable, but pressures are emerging. US unemployment declined to 4.1% amid steady hiring. Eurozone unemployment rose to 6.3% as service sectors pull back, while the UK rate climbed to 4.7% amid subdued business confidence. China’s 5.2% urban unemployment rate reflects sectoral imbalances and weak household demand. While not yet alarming, the softening trend may indicate early cracks in consumption and labour-intensive industries, warranting closer monitoring into Q4.

Productivity

The bottom line:
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Productivity trends continue to show notable divergence. The US remains the global leader, with output per hour worked rising to 81.8 USD, driven by advances in automation and sustained investment in workforce skills. The Eurozone improved to 71.32 USD, reflecting modest gains but still constrained by structural inefficiencies and uneven progress among member states. In the UK, productivity grew slightly to 69.49 USD, underscoring persistent stagnation tied to limited investment and economic uncertainty. 
Meanwhile, China’s increase to 19.77 USD highlights incremental progress fuelled by industrial upgrades, though structural challenges like an aging workforce and capital inefficiencies continue to weigh on long-term potential. These patterns underscore the uneven pace of global productivity growth, shaped by technological advancement and regional disparities.​

Source: Ibec Global original chart based on the estimates from the International Labour Organisation (ILO).