Global Economic Outlook, September 2025

Global Economy

Global Economic Review — August 2025

August brought a modest but unexpected uptick in developed-market growth, even as the path of disinflation remained uneven across major economies. Oil markets struggled to break out of their recent ranges, with Brent crude unable to sustain gains above the high-$70s as multiple agencies flagged a persistent supply-heavy balance. Against this backdrop, financial markets spent the latter part of the month increasingly focused on the pivotal policy meetings scheduled for September, with the Federal Reserve’s “cut-with-caution” stance becoming the central expectation among investors.

In the United States, economic activity showed remarkable resilience, particularly in the service sector, while manufacturing data sent mixed signals. Progress on core inflation slowed, leaving the Federal Reserve’s next move finely balanced and subject to incoming data. Bond yields swung in response to each new economic release, but equity markets largely favored the prevailing “soft-landing” narrative.

Across the Atlantic, the Euro area stabilized, buoyed by a steady improvement in PMI readings and headline inflation remaining close to target levels. The United Kingdom, meanwhile, delivered a much-anticipated rate cut and signaled a shift toward a more data-dependent policy approach as signs of growth improved, though price pressures remained uneven.

In Japan, National and Tokyo inflation cooled somewhat but stayed above the Bank of Japan’s official target, with a tight labor market offset by a softening in industrial output. The BoJ maintained a cautious tone regarding normalization. China’s momentum continued to be mixed, with uneven performance across industry and consumption. Policymakers in Beijing remained committed to targeted, rather than broad-based, stimulus measures, as property sector weakness persisted and external demand fluctuated.

On the commodities front, agency updates throughout August pointed to softer demand against a backdrop of robust non-OPEC supply, effectively capping rallies in crude oil. Base metals largely tracked the ebb and flow of Chinese economic data, while gold found support from ongoing uncertainty around interest rates and inflation.

The overall market implications were clear: global rates markets remained prone to bull-steepening on softer U.S. data, the direction of the dollar hinged on the next set of inflation readings, and the Japanese yen proved especially sensitive to any signal of policy normalization. In equities, the “soft-landing” story continued to favor quality growth and AI-driven sectors, while cyclical stocks awaited a stronger impulse from China and commodity markets.

Geopolitics & Trade War — August 2025 Review

August proved to be a turbulent month for global trade and geopolitical dynamics, marked by a series of legal shocks, new trade frictions, and rising tensions across several strategic regions. In the United States, a federal appeals court issued a landmark decision, declaring most of the White House’s 2025 global tariffs to be largely illegal. Yet, in a move that preserved uncertainty well into the autumn, the court allowed these tariffs to remain temporarily in force while appeals continue. On top of this legal overhang, U.S. policymakers ended the longstanding $800 “de minimis” duty-free threshold for small parcels, a step that immediately introduced new costs and complications for cross-border e-commerce and direct-to-consumer retailers. Meanwhile, the administration sought to avoid immediate escalation with China by extending its tariff truce through early November and prolonging select Section 301 exclusions.

America’s shifting stance reverberated across its trade partners. Mexico signaled its intent to raise tariffs on certain Chinese imports, aligning itself more closely with U.S. pressure as the 2026 USMCA review approaches. India also took notice, weighing the prospect of World Trade Organization consultations in response to fresh U.S. metal tariffs while monitoring the broader scope of American trade actions. In the background, global trade observers, including the WTO and WEF, warned that the economic drag from these 2025 tariff hikes would likely intensify in 2026 as businesses and supply chains adapt to the new landscape.

Europe’s own trade battles remained front and center, with the EU maintaining substantial countervailing duties—some nearing 45%—on Chinese electric vehicles. Attempts to negotiate minimum price arrangements failed to yield concrete results, leaving the door open to further retaliatory measures and ongoing tension in the months ahead. As the auto sector continues to be a flashpoint, both European and Chinese supply chains face persistent politicization and the risk of targeted countermeasures.

On the Geopolitical front, the Russia–Ukraine conflict took a darker turn late in August when a Russian strike on Kyiv prompted renewed calls from EU leaders for tighter sanctions and additional air-defense support. Brussels quickly signaled the imminent arrival of a new Russia sanctions package, with a clear emphasis on stricter enforcement targeting circumvention, shadow fleets, and intermediaries. While the direct macroeconomic spillover remains contained for now, the focus on shipping, energy logistics, and insurance premiums remains high.

Elsewhere, geopolitical risks in the Middle East stayed elevated, as threats against Red Sea merchant shipping continued to push up freight and insurance costs on crucial lanes. In the Indo-Pacific, persistent China–Philippines tensions and ongoing U.S.-allied military exercises underscored the region’s volatility, while Taiwanese authorities continued to highlight the scale and cost of ongoing PLA military drills.

Collectively, these developments point to a more challenging and uncertain trade environment in the months ahead. The combination of new legal uncertainty in the U.S., fresh trade barriers, and persistent geopolitical flashpoints is raising landed costs and incentivizing shifts toward near-shore fulfillment and localized inventories. In Europe, unresolved friction with China over electric vehicles may provoke sector-specific retaliation, while the evolving rhetoric over rare-earth metals is already prompting some companies to build precautionary inventories. Until clarity emerges—especially around the U.S. Supreme Court’s eventual tariff ruling—markets are likely to price in a persistent policy risk premium, especially for USD-sensitive cyclical assets.

Looking ahead, September is set to bring critical developments: the next phase in the U.S. legal battle over tariffs, new EU sanctions on Russia, Mexico’s tariff decisions on China, and any escalation in Red Sea or Hormuz shipping risks. For global trade and investment, the landscape remains as complex and unsettled as at any time in recent memory.

Global Economic Outlook — September 2025

As summer turns to autumn, September emerges as a pivotal month for global markets and policymakers alike. The economic landscape is set to be shaped by a dense calendar of central-bank decisions, critical data releases, and crucial energy reports—each with the potential to shift the narrative for the rest of the year.

The policy spotlight will be intense: the European Central Bank (ECB) meets on September 11, closely followed by the U.S. Federal Reserve (September 16–17), the Bank of England (September 18), and the Bank of Japan (September 18–19). These meetings will collectively set the tone for financial conditions and market sentiment as the world heads into the final quarter of 2025. Alongside these policy events, markets will closely monitor a barrage of high-impact economic data. The U.S. jobs report on September 5, the consumer price index on September 11, the euro area’s HICP flash estimate (September 2), and the UK’s CPI (September 17) are all poised to influence central bank thinking and market positioning.

Energy markets, too, face a crucial week in mid-September, with the EIA Short-Term Energy Outlook (September 9), the IEA Oil Market Report, and the OPEC Monthly Oil Market Report (both September 11) offering updated assessments of supply, demand, and price outlooks at a time when crude markets remain acutely sensitive to global balances.

In the United States, the Federal Reserve enters its September meeting with a “cut-with-caution” approach as the base case—should labor market data continue to cool and inflation remain subdued. However, any upside surprise in CPI could easily tip the Fed toward a more hawkish pause. This delicate balance means that incoming data may prompt sharp market reactions: softer job and inflation prints could spark a rally in the front end of the yield curve and a weaker U.S. dollar, particularly against the yen and high-beta emerging markets, while any signs of renewed inflation pressure would likely reverse these moves.

Across the Atlantic, the ECB is expected to fine-tune its guidance against a backdrop of stabilizing PMIs and inflation holding close to target. A patient, slightly hawkish tone could support the euro and nudge European bond yields higher, while a dovish turn would cap both. In the UK, after August’s initial rate moves, the Bank of England will be acutely data-dependent; the pound stands to benefit from sticky inflation or robust growth data, but any softening would reopen the door to further policy easing.

Japan’s central bank remains a wild card. Even a subtle shift in the language around its yield-curve control or JGB operations at the September 18–19 meeting could lift the yen and push global yields higher, underscoring the global sensitivity to Japanese policy normalization. Meanwhile, China’s latest PMIs and credit indicators will serve as a bellwether for Asian markets; stabilization around the 50-mark would boost risk appetite, while renewed contraction could pressure cyclicals and commodities. Targeted easing remains likely, with benchmark loan rates on hold unless currency pressures abate.

Emerging market central banks—from Türkiye’s CBRT to Taiwan and Brazil—will also be in focus, as they navigate their own cycles amid shifting global tides.

For investors and businesses, the September calendar demands vigilance. Policy decisions and data surprises will move rates, currencies, and equities, while the mid-month energy trio will help set the tone for oil and commodity markets into year-end. As always, the interplay between inflation, central-bank messaging, and economic momentum will be decisive in shaping both risks and opportunities in the months ahead.

USA

Equities pushed to new highs in August before a tech-led wobble, while the dollar softened as the macro narrative shifted toward a potential September Fed cut. Weak job growth, Powell’s dovish messaging, and steady inflation data drove this market-friendly reset, setting the stage for a closely watched start to the autumn trading season.

Entering September, the market will focus squarely on central bank meetings, particularly the September FOMC meeting and its updated economic projections and dot plot.

US Economic Review — August 2025

The U.S. economy continued to defy expectations in August, posting evidence of a resilient expansion amid gently easing price pressures and shifting consumer sentiment. The latest data confirmed that growth momentum picked up through the summer, as the second estimate of Q2 GDP came in at an impressive 3.3% annualized rate, marking a clear mid-year rebound powered largely by consumer spending. Even as households continued to open their wallets, retail sales rose 0.5% in July, with personal spending matching that pace—signs of disinflation persisted, with core PCE inflation edging up just 0.3% on the month and settling at 2.9% year-on-year.

While the soft-landing narrative remains intact, a cooling labor market warrants close attention. July’s non-farm payrolls grew by a modest 73,000, a step down from earlier trends and a signal that hiring has slowed into late summer. Both the Conference Board and University of Michigan surveys echoed a dip in household confidence, with more Americans citing concerns about job availability and lingering price increases.

Manufacturing presented a mixed picture: headline durable goods orders slumped 2.8% in July, largely due to volatile aircraft bookings, but stripping out transportation, orders rose a healthy 1.1%. Core capital goods also advanced, suggesting a stable underlying demand for business investment. Meanwhile, the housing sector showed continued resilience, as new construction started and existing home sales firmed. Builders benefited from persistently limited resale inventory, even as new-home prices eased slightly month-on-month.

Overall, the August data painted a picture of an economy balancing modest growth with cooling inflation and more cautious consumers. Policymakers will now look to September’s key labor and inflation readings to assess whether the recent trends are sustainable. For markets, a gradual path to Fed easing remains likely should labor softness continue, while the trajectory of the dollar and equities will be guided by the interplay of yields, inflation, and margin dynamics as the year moves into its final stretch.

Wall Street & US Dollar — August 2025 Review

August delivered another month of gains for Wall Street, capped by record highs in both the S&P 500 and Dow Jones Industrial Average before a late pullback as investors rotated out of high-flying tech stocks. By month-end, the S&P 500 was up 1.9%, the Dow rose 3.2%, and the Nasdaq climbed 1.6%, with both the S&P 500 and Dow closing at new all-time highs on August 28 before retreating the following day amid softness in marquee tech names like Dell and Nvidia. Notably, market breadth improved: the equal-weight S&P 500 (RSP) posted its fourth consecutive monthly advance, up 2.7% for August, signaling robust participation beyond the dominant mega-caps.

Volatility receded to multi-year lows, with the VIX touching its lowest point of 2025 mid-month and finishing near 14–15 as August ended. The market’s steady climb was underpinned by a cocktail of softer labor data, which kicked off the month with a subdued July payrolls print (+73,000 jobs, 4.2% unemployment), and a dovish tone from Fed Chair Jerome Powell at Jackson Hole on August 22, both of which helped cement expectations for a September rate cut. Inflation data released late in the month showed little surprise—July PCE came in at 2.6% year-on-year, with the core measure at 2.9%, offering little to unsettle the consensus for easier Fed policy.

The US dollar mirrored these shifts in monetary expectations, weakening nearly 2% over the month as traders increasingly priced in a policy pivot. The DXY index ended August near 97.8, and the WSJ Dollar Index fell by 1.74%. The dollar’s decline was broad-based, with currencies like the British pound rising approximately 2% for the month, even after a modest dip late in August.

In the rates market, the two-year Treasury yield finished August around 3.59%, notably lower than at the start of the month as rate-cut expectations gained traction. The 10-year yield hovered near 4.22%, representing a mild steepening of the yield curve—another signal that investors are increasingly confident in a “soft-landing” scenario.

US Economic Outlook, September 2025

As September unfolds, the focus of both investors and policymakers is squarely on the Federal Reserve’s upcoming FOMC meeting. According to CME FedWatch, markets are currently pricing in roughly a 90% probability that the Fed will deliver a 25-basis-point rate cut on September 17—the first step in what could become a gradual easing cycle. This expectation is underpinned by cooling labor market momentum, as evidenced by July’s modest nonfarm payrolls increase (+73,000), and a core PCE inflation reading of 2.9% year-on-year, both of which keep the door open for policy accommodation.

Importantly, financial markets have already discounted a 25-basis-point move, making the details of the Fed’s new dot plot and the tone of its updated economic projections especially critical. Market participants will be parsing every line of Fed Chair Powell’s press conference for hints about the path ahead. With growing scrutiny of the interplay between the central bank and the White House—and subtle tensions between the two—a hawkish tilt in Powell’s language could act as a counterweight to the rate cut, preventing an excessive easing of financial conditions.

Historically, September is a tricky month for equities, and this year is no exception. While seasonal trends should not be ignored, the macro and policy signals will ultimately drive trading and investment decisions. Investors are likely to remain cautious, watching for any deviation from the expected Fed script.

On the macroeconomic front, the U.S. expansion remains uneven. Manufacturing continues to contract, with the ISM index at 48, while services barely register growth (ISM 50.1). Second-quarter GDP growth was solid at 3.3% (SAAR), but much of that strength can be attributed to favorable import and tariff dynamics. As those effects fade, there is a growing risk that real activity will cool as we move deeper into the third quarter.

All told, the outlook for September hinges on the delicate balance between labor market softness, inflation progress, and central bank messaging. How the Fed navigates this transition will be pivotal in setting the tone for the final stretch of 2025.

What to watch in September and why!

1) Jobs week (Sep 2–5)

ISM/PMIs: Manufacturing likely to hover sub-50; watch prices-paid and new orders.

JOLTS/Beige Book: Continued easing in job openings and softer wage anecdotes would support a cut.

• NFP (Sep 5): Base case ~75–125k, jobless ~4.2–4.3%, AHE +0.3% m/m.
• Bullish for bonds/risks: Sub-100k & tame wages.
• Hawkish risk: >175–200k with 0.4% m/m wages.

2) Prices checkpoint (Sep 10–11)

• PPI/CPI: Expected core +0.2–0.3% m/m; watch supercore/services breadth. A soft print locks in a dovish tone; a hot service read complicates the cut path.

3) The September FOMC (Sep 17)

• Our base case: −25 bp and “data-dependent” wording.
• Dots/SEP: Slightly lower core-PCE path, softer labor assumptions; terminal path flatter.
• Market read-through: A benign CPI + soft NFP into the meeting = front-end rally, USD drifts lower, support for domestic cyclicals.

4) Real-economy follow-through (Sep 22–26)

• Home sales: Existing vs new split; builders still aided by tight resale supply.
• Durables: Headline volatile on aircraft; ex-transport and core capital goods are the capex tells.
• GDP third estimate: Headline near 3.3% SAAR; internals (imports/inventories) matter for Q3 momentum.
• PCE/Income/Outlays: Expect headline +0.2% m/m; core +0.2–0.3%, consistent with gradual disinflation.

5) Confidence wrap (Sep 29–30)

• Pending sales & CB Confidence: Cross-check demand, labor perceptions, and inflation expectations heading into Q4.

Scenarios & positioning (one-liners)

• Soft-landing glide (60%): NFP ≤120k, core CPI +0.2%, Fed cuts 25 bp → 2y yields lower, curve steepens, USD softer, rotation toward rates-sensitive and domestic names.
• Sticky-services shock (25%): Core CPI 0.4% with hot supercore → cut with hawkish tone or skip; USD firmer, front-end sells off.
• Labor re-accel (15%): NFP >200k + firm wages → delays follow-up easing; support for USD, pressure on duration.

Risk radar

• Tariff pass-through: Import/producer prices upside could re-ignite core goods late Q4.
• Global growth wobble: External demand weakness would show up in exports, ISM new orders, and earnings guidance.
• Financial conditions: A sharp equity/credit swing could tighten conditions regardless of a single 25 bp cut.

 UK

For markets, the mix of sticky inflation and robust wage growth suggests the Bank of England will proceed cautiously, making future rate cuts increasingly dependent on further cooling in the labor market and convincing evidence of easing services inflation. The pound found some support from the rebound in services activity, but remains capped by the prospect of only gradual policy easing. On the bond side, the front end of the gilt curve remains especially sensitive to inflation surprises and pay data, while a further steepening could emerge if growth steadies and the pace of rate cuts slows. Equities and retail-focused stocks, meanwhile, continue to face headwinds until clearer evidence emerges of a sustained upturn in consumer demand.

UK Economic Review — August 2025

The UK economy entered August in a cautiously optimistic mood, as the Bank of England delivered a widely expected 25-basis-point rate cut first since the tightening cycle began—bringing the Bank Rate down to 4.0%. The decision, passed by a narrow 5–4 vote, signaled the start of what is likely to be a gradual easing path, with the Monetary Policy Committee keenly attuned to the risks of lingering inflation pressures.

Indeed, inflation surprised to the upside in July, with headline CPI rising to 3.8% year-on-year from 3.6% the previous month. Services’ inflation remained stubbornly high at 5.0%, reflecting sticky domestic cost dynamics and prompting policymakers to strike a cautious tone even after the rate cut. Air fares and transport costs were among the key contributors to the monthly uptick in prices.

On the growth front, second-quarter GDP expanded by 0.3% quarter-on-quarter, or 1.2% year-on-year, driven by a solid performance in services (+0.4%) and a notable rebound in construction (+1.2%), offsetting a slight decline in production output. Real GDP per head also managed a modest 0.2% gain, underscoring the economy’s resilience despite persistent cost-of-living pressures.

Labour market data painted a complex picture: the unemployment rate edged up to 4.7% (April–June), while the employment rate slipped to 75.3% and economic inactivity held steady at 21%. Job vacancies fell to 718,000, a 5.8% drop on the quarter, suggesting some softening in labor demand, even as regular pay growth remained robust at 5.0% year-on-year and real pay continued to outpace inflation on the main CPI measures.

Business surveys brought more encouraging news. The flash composite PMI climbed to a one-year high of 53.0 in August, supported by a healthy reading in services (53.6). Manufacturing, however, remained in contraction at 47.3, with many firms still reporting job shedding and ongoing cost pressures.

Retail data remained a weak spot. The CBI Distributive Trades Survey recorded an eleventh consecutive month of declining sales, with a balance of –32 in August and further signs of upward price momentum. The official ONS retail sales release for July was delayed for additional quality checks, underlining the need for caution when interpreting sector trends.

U.K. Economic Outlook — September 2025

September opens with global markets still favoring a measured Federal Reserve rate cut and a continuation of the “soft landing” narrative, barring any major upside surprises in upcoming data. However, this month’s volatility risk is heightened by the convergence of several high-impact events in both the U.S. and the U.K.—a cluster that could shape not just their own markets, but global rates, currencies, and risk sentiment as well.

The U.S. heads into the FOMC meeting (Sep 17) with expectations firmly set on a 25-basis-point rate cut, supported by evidence of cooling labor momentum and subdued inflation (July NFP +73k, core PCE 2.9% y/y). Markets are now highly data-dependent, with any significant surprise in U.S. jobs or CPI capable of flipping the script. But it’s not just the Fed that will drive the market narrative: the U.K.’s labor market report (Sep 16), CPI (Sep 17), and Bank of England decision (Sep 18) all land within a 48-hour window of the FOMC, creating a potent “volatility cluster” for U.S. front-end yields, the dollar, and global risk appetite.

It’s important to remember that U.S. and U.K. rates—particularly gilts and Treasuries—often react in tandem to macro surprises. A hotter- or cooler-than-expected U.K. CPI, or an unexpected move from the BoE, can easily nudge U.S. 2–5-year yields, especially with the FOMC decision sandwiched between them. For sterling, a softer CPI or dovish BoE could mean the brief pound rally seen in August loses momentum, especially if labor market data on September 16 confirms a slowdown in wage growth—the U.K.’s own “supercore” inflation measure and a key MPC focus.

Key U.K. Data to Watch in September:

• Sep 1: Money & Credit (Jul), BoE mortgage approvals, consumer/business credit, S&P Global/CIPS Manufacturing PMI (final, Aug), Nationwide House Price Index (Aug)
• Sep 3: Services & Composite PMI (final, Aug)
• Sep 4: Construction PMI (Aug)
• Sep 12: Monthly GDP (Jul)
• Sep 16: Labour Market (jobs, pay, vacancies)
• Sep 17: Inflation — CPI/CPIH/RPI (Aug), UK House Price Index (Jul)
• Sep 18: BoE MPC rate decision & minutes (noon UK)
• Sep 19: Retail Sales (Aug), Public Sector Finances (Aug), GfK Consumer Confidence (Sep)
• Sep 30: Quarterly National Accounts (Q2, 3rd estimate)

As always, the Bank of England’s Monetary Policy Committee places heavy emphasis on wage momentum and services inflation as it plots the rate path. Expect any downside surprise in pay growth to reinforce a gradual glide-path for rate cuts, while sticky inflation could delay further easing.

Bottom Line:

September is shaping up as a data-rich, policy-heavy month. The outcome of the Fed and BoE meetings, flanked by critical labor and inflation reports, will set the tone for rates, FX, and equities on both sides of the Atlantic. Traders and investors should be prepared for swift cross-market moves—particularly in the U.S. dollar, pound sterling, and front-end yields—driven by the interplay of macro data and central bank guidance.

EU

September is set to be a month of cautious data-watching in the eurozone, with subdued growth, stable but still-sensitive inflation, and a policy stance that hinges on the latest readings from the region’s services sector and consumer demand. For investors and traders, every PMI and HICP print will matter—and so will the ECB’s messaging as it navigates an uncertain, post-summer landscape.

With headline inflation at 2.0% and core inflation stable, the ECB is well-positioned to remain patient through early autumn. The outlook for rates will hinge on the persistence of services inflation and external shocks, particularly in trade and energy. The euro remains supported by hopes of a soft landing, but further gains will likely be capped unless sentiment and consumption indicators rebound convincingly. For equities and credit, the recent uptick in PMIs provides some relief for cyclicals, but investors should keep a close watch on Germany’s consumer mood and ongoing tariff negotiations as potential drags into Q4.

Euro Area Economic Review — August 1–30, 2025

August delivered a picture of steady, if subdued, resilience for the euro area economy. Inflation remained under control, with July’s HICP holding at 2.0% year-on-year and core inflation settling around 2.3%. Services continued to drive the inflation mix, while goods’ disinflation provided a moderating influence. Financial markets largely interpreted these developments as consistent with the European Central Bank’s patient policy stance heading into September.

Growth, however, slowed modestly from earlier in the year. Second-quarter GDP rose just 0.1% quarter-on-quarter and 1.4% compared to a year ago, deceleration from Q1’s pace, though still pointing to ongoing resilience. France and Spain managed to support the regional numbers, while Germany lagged. The labor market remained a key buffer against recession: the euro area jobless rate stood at a low 6.2% (latest available June data), helping underpin household incomes even as hiring momentum eased.

Business activity in August showed tentative improvement, with the HCOB Eurozone composite PMI edging up to 51.1, the highest in several months. The expansion was again led by services, offsetting lingering softness in manufacturing. Retail volumes ticked up 0.3% in June, offering a modest base for third-quarter consumption, but broader sentiment indicators slipped—ESI dropped to 95.2 and flash consumer confidence slid further to –15.5, reflecting cautious households and businesses ahead of autumn.

On the policy front, minutes from the ECB’s July meeting (published August 28) revealed a Governing Council divided over inflation risks, especially with trade and tariff uncertainties in the backdrop. The central bank’s Consumer Expectations Survey kept 12-month inflation expectations anchored around 2.6%, underlining the case for keeping options open as the economic outlook remains mixed. Notably, Germany’s GfK consumer climate reading for September, released late August, tumbled to –23.6—a stark reminder of the challenges facing Europe’s largest economy.

Eurozone Economic Outlook — September 2025

The euro area enters September with a cautious but not recessionary outlook. Flash PMI readings for August indicate modest expansion, thanks to services holding the composite near 51.1, while manufacturing continues to lag. Inflation remains close to the ECB’s 2% target, with July HICP confirmed at 2.0% year-on-year and the August flash estimate due on September 2. Market attention is firmly set on the upcoming ECB meeting (September 10–11), where policymakers are expected to emphasize “optionality” and data-dependence—waiting for clearer signals from the latest PMIs and HICP inflation prints before shifting policy. For now, consensus is that the ECB will hold rates steady, which should lend mild support to the euro, particularly versus the GBP and USD.

Interest Rate & Market Outlook

With both inflation and growth indicators trending stable, the curve bias is toward bull flattening around the ECB meeting if the latest inflation and services data remain benign. However, a hotter inflation print or persistent cost pressures in services could expose the front end of the curve to renewed selling. On the data side, the end of summer holidays is expected to weigh on services activity in major tourism-driven economies such as Spain, Italy, and Portugal, adding a layer of caution to the overall economic outlook and potentially limiting the euro’s ability to rally on a “steady hand” ECB.

Sector & Inflation Dynamics

While PMIs hover just above 50, signaling slow expansion, manufacturing is still a drag even as services remain in growth territory. Industrial production is likely to stay soft, and retail trade results have been mixed. Though better PMIs help cyclical equities at the margin, markets will look for confirmation from industrial and retail data before extending bets on a sustained upturn.

On the inflation front, all eyes are on the September 2 HICP flash, which is expected to show headline inflation holding near 2% and core inflation just above target. The final reading on September 17 should validate this trend and set the tone for the ECB’s forward guidance into the autumn.

What to Watch — Key Eurozone Data & Events (September 2025)

• Mon, Sep 1:
• HCOB Eurozone Manufacturing PMI (final, August)
• — A stabilization in new orders would support the “soft landing” scenario.
• Tue, Sep 2:
• Euro area HICP flash (August)
• — The first read on August inflation, arriving just ahead of the ECB meeting.
• Wed, Sep 3:
• HCOB Services & Composite PMIs (final, August)
• Eurostat Producer Price Index (PPI, July)
• — Services prices and PPI pipeline pressures in focus.
• Thu, Sep 4:
• Eurostat Retail Trade (July)
• — Weakness here would reinforce a cautious stance on consumer recovery.
• Fri, Sep 5:
• Quarterly National Accounts (regular estimates: Q2 GDP & Employment)
• — Fine-tunes the Q2 growth picture just as the ECB prepares to meet.
• Wed–Thu, Sep 10–11:
• ECB Governing Council Meeting (Frankfurt)
• — Rate decision and press conference on September 11; expect a focus on incoming inflation and services data.
• Tue, Sep 16:
• Eurostat Industrial Production (July)
• — Another soft reading would cap growth hopes.
• Wed, Sep 17:
• Euro area HICP (August, final)
• — Confirmation or revision of the flash print, arriving just after the ECB meeting.
• Mon, Sep 22:
• European Commission Flash Consumer Confidence (September)
• — A fresh check on household demand heading into Q4.

China

China remains in a patchwork recovery: solid gains in services and external trade are balanced by persistent property and upstream price pressures, while cautious credit and monetary policy underscore the authorities’ preference for fine-tuning over blanket stimulus as the economy navigates a challenging global and domestic landscape.

China Economic Review — August 2025

China’s economy showed a complex mix of resilience and strain through August, as pockets of growth were offset by persistent deflationary forces and ongoing challenges in property and credit.

Inflation & Producer Prices

Headline inflation remained subdued, with July CPI flat year-on-year and core CPI rising just 0.8%. Weaknesses in food prices dragged on overall inflation, while services inflation held steady at a modest 0.5%. The deeper concern lies upstream: producer prices continued to fall, with the PPI down 3.6% year-on-year, a sign that margins and pricing power remain under pressure, especially for heavy industry.

Growth & Demand

Despite these pricing headwinds, real activity was mixed but not stagnant. Industrial output rose 5.7% year-on-year in July, driven by strength in manufacturing and infrastructure. Retail sales posted a 3.7% gain, indicating that household demand continues to recover, albeit at a measured pace. Fixed asset investment grew by just 1.6% year-to-date, with manufacturing (+6.2%) and infrastructure (+3.2%) providing support, but real estate investment plunged 12% and remains the main drag on the growth story. The national urban jobless rate held steady at 5.2%.

Trade & Credit

China’s trade sector surprised on the upside, as exports jumped 7.2% year-on-year (in USD terms) and imports rose 4.1%. Some of this outperformance likely reflected front-loading of shipments ahead of anticipated global tariff changes. In credit markets, the July data brought a rare contraction in new yuan loans (−¥50 billion), the first monthly drop in nearly two decades, highlighting persistent weak credit demand and cautious bank lending. Total social financing (TSF) expanded by ¥1.16 trillion, but the tone of policy remained cautious: benchmark loan prime rates were held steady in August, with authorities signaling a preference for targeted liquidity support and property-sector relief over broad rate cuts.

Activity Pulse & Sectoral Trends

Survey data highlighted a mixed backdrop. The official manufacturing PMI held below 50 at 49.3, signaling continued contraction, while the non-manufacturing PMI just edged into expansion at 50.1. In contrast, the S&P Global services PMI rose to 52.6, its best reading since May 2024, reflecting ongoing outperformance in consumer-facing services relative to factory activity.

Property Market

The housing sector remained under pressure. New-home prices in China’s 70 largest cities fell 0.3% in July and were down 2.8% year-on-year, although declines in the largest tier-1 cities narrowed slightly as local governments ramped up targeted easing.

Market & Policy Implications

For financial markets, persistent PPI deflation and weak credit growth argue for further targeted easing rather than aggressive monetary stimulus. The currency and rates backdrop remains steady for now, but any future moves will likely hinge on signals from the property sector and monthly liquidity operations. In equities, the resilience of the services sector continues to offset softness in manufacturing, and policy-aided industries—particularly high-tech and manufacturing upgrade themes—stand to benefit most from ongoing support. On the credit side, slower TSF expansion and cautious local government and policy bank issuance keep infrastructure investment on a short leash. Commodities markets, meanwhile, are grappling with weak input prices and mixed demand signals, especially as real estate continues to weigh on the outlook.

China’s outlook for September remains one of “selective easing and gradual disinflation.” Policymakers are likely to continue treading carefully, supporting the real economy with targeted measures while holding back on broad rate cuts. Services are expected to underpin growth, while property and manufacturing weakness, together with persistent deflationary pressures, keep risks skewed toward caution for both markets and policymakers.

China Economic Outlook — September 2025

China enters September 2025 with a mixed economic backdrop: services continue to drive expansion, while manufacturing remains subdued, and inflationary signals are faint at best. July’s headline CPI was flat year-on-year, while producer prices stayed deep in negative territory (PPI −3.6% y/y), reinforcing the theme of persistent upstream deflation even as consumer-level price growth stalls. Industrial output expanded solidly (+5.7% y/y in July), but retail sales and fixed-asset investment posted only modest gains, with the property sector still exerting a strong drag on overall growth.

Policy & Credit Dynamics

The People’s Bank of China is expected to maintain its current Loan Prime Rate (LPR) when it is set on September 22, favoring selective liquidity injections and targeted relief measures over broad-based rate cuts. July’s rare contraction in new yuan loans underscores ongoing caution among banks and soft credit demand in the real economy. With upstream deflation and only mild consumer inflation, the authorities are likely to continue relying on fiscal levers, targeted property-sector support, and structural credit tools to underpin activity—rather than headline monetary easing.

Activity Pulse & Sector Trends

Early September Caixin PMIs are set to provide a first read on growth momentum. Expectations are for manufacturing to hover near the 50-line, signaling flat activity, while services should remain in firm expansion, sustaining a composite reading consistent with the “soft landing” narrative. Industrial production growth is expected to moderate relative to spring, especially as energy-intensive sectors and property-linked activity stay soft. Retail sales are likely to show low single-digit year-on-year gains—indicative of steady but unspectacular household demand.

Fixed-asset investment will remain split: ongoing contraction in real estate investment is expected to offset moderate gains in manufacturing upgrades and infrastructure. The housing market, meanwhile, is unlikely to find much near-term relief; month-on-month declines in new-home prices should continue, though top-tier cities may see some stabilization amid localized easing.

Trade & External Sector

After July’s strong trade rebound, partly attributed to front-loading ahead of tariff deadlines, August trade data may show some moderation as those effects fade. Electronics and machinery shipments will be key sectors to watch for ongoing tariff and channel impacts.

Inflation Outlook

CPI is likely to stay close to zero, with food base effects offset by steady services prices. The PPI is expected to remain negative (−3.3% to −3.7% y/y), although the pace of decline may narrow compared to previous months. Persistent deflationary pressure upstream will continue to challenge margins and keep the bias toward further targeted easing.

Market Implications

• Rates/CNY: Ongoing upstream deflation and only mild CPI create room for selective monetary easing. Unless activity data surprises to the upside, bond yields are likely to stay range-bound, and the renminbi (CNY) could drift softer on any dovish policy cues.
• Equities: The outperformance of services should continue to support domestic consumption and tech-upgrade sectors, while property-linked names remain sensitive to negative headlines.
• Credit: Weak PPI and subdued capex reinforce benign input costs, but persistent pricing-power risks suggest a preference for firms with stronger balance sheets.
• Commodities: Soft PPI numbers align with weak upstream pricing; market participants should watch industrial production prints for clues on real demand.

Key September 2025 Data & Policy Dates

• Mon Sep 1: Caixin Manufacturing PMI (August)
• Wed Sep 3: Caixin Services & Composite PMI (August)
• Mon Sep 8: Trade (August) exports/imports (GACC)
• Wed Sep 10: CPI & PPI (August)
• Mon Sep 15: Industrial Production, Retail Sales, Fixed-Asset Investment (August); 70-city new-home prices (August)
• Tue Sep 30: Official NBS PMIs (September)
• Mon Sep 22 (expected): LPR fixing (rescheduled as the 20th is a Saturday)—a signal for mortgage and credit policy

Japan

September will test whether services-led expansion can offset factory volatility, and whether sticky core-core inflation keeps the BoJ cautious. For markets, all eyes are on how data shape the BoJ’s message, yen dynamics, and the resilience of both domestic and exporters as Japan heads into the final quarter of the year.

Japan Economic Review — August 2025

Japan’s economic data for August painted a picture of cautious progress, with underlying inflation pressures persisting, a remarkably tight labor market, and an ongoing divergence between services strength and manufacturing softness.

Inflation Pulse

Tokyo’s August CPI figures—regarded as a leading signal for national inflation—showed headline inflation easing to 2.6% year-on-year, and core inflation dipping to 2.5%. Yet, the “core-core” gauge (excluding fresh food and energy) remained near 3.0%, underscoring that underlying price pressures have yet to fully subside. The moderation in headline and core inflation was largely a function of continued subsidies tempering energy prices, but persistent cost pressures in the broader economy keep the Bank of Japan (BoJ) data-dependent and cautious on normalization.

Labor Market

Japan’s labor market remained one of the tightest in the developed world. The unemployment rate fell to 2.3% in July, reaching its lowest level since 2019, while the jobs-to-applicants ratio held at 1.22. These figures highlight both steady demand for workers and the broader structural challenges of Japan’s shrinking labor force. Although hiring momentum has cooled slightly, wage pressures are likely to remain in focus for policymakers watching for evidence of sustainable inflation.

Industry & Demand

The industrial sector delivered mixed signals in July, with factory output contracting by 1.6% month-on-month. However, manufacturers’ forward guidance was more optimistic, projecting a potential 2.8% rebound in August. Retail sales growth was a muted 0.3% year-on-year, reflecting cautious household spending in the face of ongoing real-income pressures.

PMIs and Sectoral Trends

Japan’s August PMI data showed continued resilience in the services sector, with the composite PMI rising to 51.9. Services activity led the expansion, while manufacturing edged closer to stability at 49.9, just below the critical 50-line separating growth from contraction. The service-driven momentum supports domestic equities, but export-oriented sectors such as autos and machinery remain vulnerable to global demand headwinds until a sustained recovery in factory output materializes.

Market & Policy Implications

For the BoJ, the combination of sticky “core-core” inflation and robust labor market dynamics argues for patience and a data-driven approach. Markets remain highly sensitive to front-end yield spreads; persistent core inflation can support the yen, but global risk sentiment and moves in U.S. Treasuries are likely to remain dominant drivers. Meanwhile, the outlook for Japanese equities favors domestic services and consumption themes, while exporters await clearer signals from both global demand and domestic industrial recovery.

Japan Economic Outlook — September 2025

Japan enters September with a cautiously steady macro backdrop. The latest data confirms that the services sector remains the engine of growth, even as manufacturing production wobbles. July industrial production slipped 1.6% month-on-month, but manufacturers expect a rebound in August, followed by a likely dip in September—a rhythm that traders and policymakers will watch closely. With inflation easing at the margin and labor markets still tight, the Bank of Japan (BoJ) is widely expected to keep its policies unchanged at the September 18–19 meeting.

Policy & BoJ Watch

There is no mechanical move expected from the BoJ this month. Instead, the central bank will focus on qualitative signals: wage formation, trends in services inflation, and the pace of JGB purchases. The meeting on September 18–19 is set to reinforce a patient, data-dependent stance, especially with national CPI (August) due the same day and Tokyo’s CPI for September to follow on the 26th. Both are expected to show gentle disinflation in headline and core gauges, but the stickier “core-core” measure remains key for the policy outlook.

Macro Activity & Sector Trends

• Manufacturing/IP: After July’s 1.6% decline, firms guide for a +2.8% bounce in August and a possible −2.7% fall in September. The September 12 revision and late-month PMIs will be crucial for confirming if auto and electronics output is stabilizing, which would help ease concerns about a Q3 drag.
• Services: The tertiary sector is set to post modest month-on-month gains, with PMIs holding above 50, ensuring the composite index stays in expansion—unless new orders or employment falter.
• Inflation: Upstream cost gauges like the Corporate Goods Price Index (CGPI) are expected to remain subdued. Any yen-driven import cost pass-through will show gradually, not all at once.
• Consumer Prices: National CPI for August (out Sep 19) and Tokyo CPI for September (Sep 26) should both confirm a gentle disinflation trend, though core-core inflation is expected to stay sticky—a crucial metric for BoJ communications.

External & Trade

Following midsummer volatility, export figures for August, especially for machinery and electronics, will reveal if external demand is steadying. Services trade, supported by tourism, remains a bright spot.

Market Implications

• Rates/JGBs: Soft upstream and consumer price data provide room for front-end JGB outperformance; a firmer core-core or resilient services sector could cheapen longer maturities.
• FX (JPY): The yen is most sensitive to global front-end yield spreads and BoJ tone. A softer CPI combined with a patient BoJ keeps the JPY in a range, or slightly weaker, unless U.S./ECB yields drive global rates lower.
• Equities: Services strength and input-price relief benefit domestic-oriented names. Exporters will need stabilization in IP and further clarity on the yen’s path.

Key Japan Data & Events — September 2025

• Mon Sep 1: au Jibun Bank Manufacturing PMI (final, August)
• Mon Sep 8: Q2 GDP (second estimate); Balance of Payments (July)
• Tue Sep 9: Money Stock (August)
• Thu Sep 11: CGPI / Producer Prices (August)
• Fri Sep 12: Industrial Production (July, revised)
• Tue Sep 16: Tertiary Industry Activity (July)
• Thu–Fri Sep 18–19: BoJ Monetary Policy Meeting (statement Sep 19); National CPI (August)
• Thu Sep 25: SPPI (August)
• Fri Sep 26: Tokyo CPI (September, Ku-area)
• Tue Sep 30: Retail Trade (August, prelim); Trade Statistics (August)

Emerging Economies

September is shaping up as a critical month for emerging markets. Policymaker caution and incoming data will determine whether easing cycles can begin or whether restrictive stances must persist, especially with global risks still swirling and local inflation profiles diverging.

Emerging Markets Review — August 2025

Turkey, Brazil, India, Russia

Turkey

Turkey’s macro landscape in August reflected ongoing disinflation alongside persistent economic headwinds. July CPI eased to 33.5% y/y, continuing the recent disinflation trend, but price pressures remain elevated. The Central Bank (CBRT) last cut rates to 43% in late July and has since held steady, maintaining a restrictive tone despite soft domestic demand (Jul PMI at 45.9, deep in contraction). The jobless rate remained stable at 8.0% and industrial production showed a modest rebound (+8.3% y/y in June). The CBRT’s August Inflation Report outlined a cautious policy outlook, with real rates still tight to anchor expectations as demand softens.

Brazil

Brazil’s August data pointed to further disinflation, as the IPCA-15 showed a small monthly decline (–0.14%), driven by lower electricity and housing costs. Unemployment hit a fresh low at 5.8%, but retail sales have declined for three straight months (–0.1% m/m in June), and manufacturing PMI remained in contraction (48.2). The central bank (Copom) kept the Selic rate at 15% in late July and maintained cautious guidance. While inflation progress sets the stage for eventual easing, the Copom wants to see broader improvement in price dynamics and domestic demand.

India

India stood out in August for its strong growth momentum and sharply lower inflation. July CPI fell to 1.55% y/y, the lowest since 2017, with food prices negative on the year. Flash PMIs for August surged to multi-year highs (services 65.6, manufacturing 59.8, composite 65.2), highlighting robust expansion. The RBI kept its policy repo rate on hold at 5.50% on August 6, emphasizing vigilance amid rapid growth. With inflation well below target, the stance remains on hold for now, but the bias is toward gradual normalization if demand remains elevated.

Russia

Russia’s economy showed further signs of stagflation. July CPI climbed to 8.79% y/y, while Q2 GDP growth slowed to +1.1% y/y. PMIs for July stayed in contraction territory (manufacturing 47.0, services 48.6), reflecting broad-based weakness. The central bank (CBR) cut its key rate to 18% in late July, but communications remain cautious, signaling ongoing risks to both inflation and growth. The combination of high inflation, weak PMIs, and slowing GDP keeps policy tight and the outlook challenging.

Market & Strategy Takeaways

• Rates:
• Brazil, India: Easing bias is strongest where inflation has clearly improved.
• Turkey: Remains restrictive, balancing inflation credibility and soft demand.
• Russia: Policy remains tight to fight inflation despite slow growth.
• FX:
• INR: Supported by strong growth and low inflation.
• BRL: Sensitive to inflation data and central bank tone.
• TRY: Tracks the credibility of CBRT policy and real rates.
• RUB: Weighed down by growth slowdown.
• Equities/Credit:
• Preference for Indian cyclicals/services (growth).
• Brazil's defense against the disinflation trend.
• Turkish exporters are attractive if the lira is stable.
• Remain cautious on Russian assets given weak activity and high inflation.

Emerging Markets Economic Outlook — September 2025

(Turkey | Brazil | India | Russia)

Turkey (TR)

Turkey enters September with continued disinflation from summer peaks, but inflation remains stubbornly high. The Central Bank of the Republic of Turkey (CBRT) is widely expected to keep its restrictive tone at the September 11 MPC meeting, favoring macro-prudential tools over further rate cuts. Key data releases—August CPI (Sep 3) and PMIs—will shape the path for local markets. A soft inflation print could bring relief to the lira (TRY) and support local rates, while sticky services inflation or persistent PMI weakness will keep growth and equities subdued, favoring defensives over cyclicals.

What to Watch:

• CPI (Aug): Sep 3
• Manufacturing PMI (final): Sep 1; Services PMI (final): Sep 3
• CBRT MPC: Sep 11; Minutes: Sep 18

Brazil (BR)

Brazil remains in a cautious holding pattern. With headline inflation running near 5% y/y and the August IPCA-15 showing a rare monthly dip, the central bank (Copom) is expected to keep rates unchanged at its September 16–17 meeting while emphasizing data dependence. Any broad-based disinflation c