Overview of Conditions

Updated 5 June 2025: As of June 2025, the global economy continues to lose momentum, with recovery increasingly uneven and vulnerable to policy shocks. The IMF’s latest projections, supported by OECD Q1 data, confirm a downshift in global growth amid tightening financial conditions, trade disruptions, and heightened geopolitical instability.

Trade tensions with China remain unresolved, weighing on global supply chains and investment sentiment. Meanwhile, the US threatened to impose a 50% tariff on EU imports, significantly escalating transatlantic trade frictions—though the measure was subsequently postponed following renewed diplomatic engagement. Markets initially rebounded following the April pause, but volatility resurfaced as negotiations with key partners faltered.

Against this backdrop, central banks are proceeding cautiously. The Fed remains on hold amid conflicting inflation signals and trade uncertainty, while the ECB maintains its easing stance, and the Bank of England has already initiated rate cuts. In China, targeted stimulus continues in the face of mild deflation. As economic fragmentation grows, policymakers are increasingly forced to balance fragile growth, sticky inflation, and rising systemic risks.

See below for more detail on current global business conditions.

Global Economy 

In this section, we examine GDP growth forecasts for the EU, UK, US and China using data from the OECD, IMF, World Bank and FDI flows using data from OECD and UNCTAD.

GDP Growth 


Source: Original Ibec Global chart based on the data from: International Monetary Fund. (December 2024). OECD Economic Outlook, Volume 2024 Issue 2: Preliminary version, World Bank. 2024. Global Economic Prospects, January 2025.

The bottom line:

According to the OECD’s June 2025 Economic Outlook, global growth is slowing more sharply than expected, with GDP across member countries rising just 0.1% in Q1—down from 0.5% in Q4 2024—and full-year global growth now projected at 2.9%. This slowdown supports the IMF’s revised global GDP forecast of 2.8% for 2025 and aligns with the World Bank’s recent caution over persistent global fragilities. In the US, GDP growth is projected at 1.6% in 2025, as elevated tariffs and trade uncertainty continue to weigh on activity. The euro area is expected to expand by just 1.0%, with limited gains masking persistent divergence among member states. The UK is projected to grow by 1.3%, though tighter financial conditions, trade tensions and fiscal pressures can constrain momentum. Meanwhile, growth in China is expected to slow to 4.7%, as internal imbalances and weak external demand offset the effects of continued policy support.

FDI flows

The bottom line:

According to newly released OECD data (Q4 2024), global FDI flows remain uneven. The EU saw a modest recovery despite persistent regulatory and growth challenges, while the UK experienced another dip. The US stood out with strong inflows, reflecting macroeconomic stability and solid corporate performance. However, trends in early 2025 tell a more cautious story: rising trade tensions and policy uncertainty have started to weigh on investor sentiment, softening the outlook.

Meanwhile, China’s FDI downturn has continued to deepen, driven by structural challenges and geopolitical frictions. Together, these shifts signal a gradual rebalancing of global investment strategies, with select emerging markets gaining attention as investors seek greater diversification and resilience in an increasingly complex global environment.


Source: Original Ibec Global chart based on OECD data

Source: Original Ibec Global chart based on OECD data


Source: Original Ibec Global chart based on UNCTAD data.


Source: Original Ibec Global chart based on UNCTAD data.

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 are taking diverging approaches as they navigate the current situation. The European Central Bank held rates steady—keeping the deposit facility at 2.25%, the main refinancing rate at 2.40%, and the marginal lending facility at 2.65%—maintaining a cautious stance amid persistently weak industrial output and fragile business confidence. The Federal Reserve also remained on hold at 4.25–4.5%, as it evaluates the potential impact of inflation and trade-related pressures.

In contrast, the Bank of England cut its rate from 4.5% to 4.25%, reflecting early signs of economic softening and market expectations for further easing. Meanwhile, the People’s Bank of China trimmed its benchmark rate from 3.1% to 3.0%, balancing the need for domestic stimulus with capital flow and currency stability concerns. These moves underscore growing policy divergence as central banks weigh inflation dynamics, growth risks, and financial stability.

 Rate paths are increasingly being shaped not only by domestic macro indicators, but also by geopolitical friction and trade uncertainty—making alignment across regions more elusive.

As of May 2025, inflation data continue to show significant differences across major economies, complicating the task of monetary authorities. In the US, annual inflation edged down to 2.3%, while core inflation rose to 2.8%, reflecting underlying price pressures following recent tariff adjustments. In the euro area, inflation remained stable at 2.2%, supported by a modest rebound in consumer sentiment and improving business indicators. In the UK, inflation increased to 3.5%—its highest level in over a year—driven by rising utility and transport costs, reducing the likelihood of near-term rate cuts. In contrast, China registered a year-on-year decline of 0.1% in April, reflecting continued consumer caution and muted domestic demand despite some price increases in services.


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 May 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:

Equity markets posted cautious gains in May, supported by improving sentiment and resilient business indicators. The S&P 500 remained broadly stable, while the Euro Stoxx 50 slipped modestly amid uneven earnings results. UK equities came under renewed pressure as inflation surprised to the upside, clouding the outlook for rate cuts. In China, equity performance remained subdued, weighed down by weak domestic demand despite continued policy support. While fears of immediate tariff escalation eased following renewed US-EU trade dialogue, uncertainty remains high, and markets are increasingly sensitive to signals from ongoing negotiations—underscoring how geopolitics continues to shape investor positioning.




Bond Markets

Source: Ibec Global original chart based on Germany 10Y Bond; UK 10Y Bond; US 10Y Bond and China 10Y Bond.;

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.







In May 2025, bond markets remained relatively stable, shaped by diverging inflation paths and evolving policy expectations. US yields showed little movement as markets digested persistent core pressures and shifting trade developments. In the eurozone, yields stayed contained, anchored by improving confidence and speculation around gradual monetary easing. UK yields moved slightly higher amid renewed inflation concerns, while Chinese bonds traded flat, in line with a measured policy approach and subdued domestic momentum.





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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:

According to the latest data for Q1 2025, labour markets across major economies remain broadly stable, but early signs of cooling are becoming more visible. In the US, the unemployment rate has held steady at 4.2%, suggesting a pause in hiring momentum amid tighter financial conditions and ongoing trade frictions. The Eurozone’s gradual decline to 6.2% points to resilience, yet underlying softness is emerging in consumer-facing sectors. In the UK, unemployment edged up slightly to 4.5%, reflecting delays in recruitment linked to economic uncertainty. Meanwhile, China’s urban jobless rate rose to 5.3%, indicating mild pressure on employment despite steady headline figures. Overall, while labour market conditions remain firm on the surface, confidence appears to be softening as firms navigate an increasingly complex global environment.

Productivity

The bottom line:

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).

Trade

In this section, we examine the value of exports using data from the World Trade Organisation.


Exports

The bottom line:

While the WTO’s April Global Trade Outlook projected a 0.2% contraction in global merchandise trade for 2025, recent developments risk pushing that figure sharply lower. As of May, trade tensions have escalated significantly, with US President Trump threatening a 50% tariff on EU goods, citing stalled negotiations and persistent trade imbalances. This announcement comes amid renewed friction with China, following paused but unresolved tariff hikes. Although services trade remains more resilient, its forecast has already been revised down to 4.0%, reflecting spillover effects from the goods sector. The WTO warns that persistent uncertainty and rising protectionism could severely undermine global trade and disproportionately impact export-dependent and vulnerable economies. Markets have already reacted, with both European and US equities slipping on fears of a reignited trade war. As policy fragmentation deepens, the global trading system faces increasing systemic risk.



Source: Ibec Global original chart based on the data from the April 2024 WTO Global Trade Outlook and Statistics.

CEO Sentiment & Outlook

In this section, we analyse CEO sentiment and outlook by aggregating multiple globally-renowned sources including from KPMG, EY and PwC and Deloitte & Fortune.

The bottom line:

CEO outlooks for 2025 reflect strategic caution amid rising complexity. While there is still measured optimism—particularly around AI and digital transformation—persistent macroeconomic volatility, trade tensions, and geopolitical instability are reshaping priorities. Generative and agentic AI adoption is accelerating, but leaders remain realistic about short-term revenue impact, focusing instead on operational efficiency, responsible use, and workforce reskilling.

Sustainability is increasingly tied to business performance, with ESG efforts aligning closely to digital goals. However, progress is inconsistent, and stakeholder demand for measurable outcomes is intensifying. Meanwhile, tariffs and supply chain disruption are pushing CEOs to reallocate capital, build resilience, and adopt scenario-based planning. In short, 2025 will be defined by targeted execution—success will favour those who act decisively, invest selectively, and adapt faster than the uncertainty around them.


Overall Sentiment​

KPMG

74%

of global CEOs express confidence in the global economy over the next 3 years, reflecting improved sentiment from 2023 (73%).

EY

67%

of CEOs expect revenue growth, but 33% foresee challenges ahead due to macroeconomic volatility.

PwC

52%

of CEOs expect revenue growth, with focus shifting to resilience rather than expansion.

Deloitte & Fortune

60%

of CEOs are optimistic about their own company’s performance, down from 84% in Fall 2024. Meanwhile, 58% express pessimism about the global economy over the next 12 months, a sharp rise from 18%.


Key highlight​

KPMG

79%

of CEOs believe tightening monetary policies and persistent cost-of-living pressures will challenge organisational growth, yet 82% aim to sustain long-term investments in talent and technology.

EY

92%

of CEOs place digital transformation as the cornerstone of their 2024 agenda, focusing on AI and workforce upskilling.

PwC

49%

of CEOs worry their organisations may not remain viable in 10 years unless immediate structural changes are made.

Deloitte & Fortune

71%

of CEOs plan to adapt their supply chains in response to shifting trade policies. Cost management strategies include cutting costs (42%) and limiting price hikes (only 28%).


Sustainability​

KPMG

72%

of global CEOs have embedded
ESG into their strategies, but 65%
express concern over stakeholder scrutiny and pressure to deliver measurable outcomes.

EY

CEOs emphasise alignment of ESG initiatives with digital transformation strategies to meet stakeholder demands.

PwC

68%

of CEOs report decarbonisation progress, with energy efficiency leading the way.

Deloitte & Fortune

Environmental issues fell from 14% to just 2%, indicating a significant loss of priority amid economic and geopolitical pressures.

Technology
​

KPMG

83%

of CEOs view Generative AI as critical to long-term competitiveness, but concerns about ethical use persist.

EY

78%

of CEOs are investing heavily in AI to boost efficiencies, though 64% worry about limited impact on revenue.

PwC

70%

of CEOs see AI as a double-edged sword—improving efficiency but creating workforce reskilling challenges.

Deloitte & Fortune

89%

of CEOs are exploring or implementing agentic AI, and nearly two-thirds report GenAI is delivering value. One in ten CEOs expect at least one business function to be fully implemented with agentic AI by year-end.

 


Top Concern ​

KPMG

81%

of CEOs cite geopolitical instability as their primary external disruptor, while inflation and energy transition remain key risks.

EY

77%

worry about political instability and its impact on economic conditions, especially in key markets.

PwC

28%

of CEOs see inflation as their top concern, while macroeconomic volatility (26%), and geopolitical conflict (22%) also remain as significant concerns for CEOs.

Deloitte & Fortune

72%

put geopolitical instability as the top external business disruptor, followed by inflation (44%) and other sources of financial/market instability (40%). Concerns over supply chain disruption also rose significantly to 25%, up from 11% in Summer 2024.

Source: Original Ibec Global based on the results of KPMG 2024 CEO Outlook; EY January 2025 CEO Outlook; PwC 28th Annual Global CEO Survey; Fortune/Deloitte CEO Survey: Spring 2025.