Global Economic Outlook – Week 49, 2025: Soft Landing Hopes, Disinflation and Uneven Growth

U.S. still leads a disinflationary soft-landing story, Europe grinds along in low-growth mode, China battles property and profit headwinds, Japan edges toward BoJ tightening, and EMs ride a softer dollar and cheaper oil in a highly uneven, country-specific cycle.”

author: Ahura Chalaki

177

published:Dec 1, 2025 7:11

category:weekly

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Global Macro Snapshot – “Soft-landing hopes, disinflation, local fragilities.”

This week’s global picture is classic soft-landing with pockets of stress:

The U.S. remains the main growth engine, but with slower consumers and weaker manufacturing.
Europe (EU + UK) is stuck in low-growth, disinflation mode, with Germany flat and France/Italy doing slightly better.
China is weighed down by property and profit pressures despite a friendlier external backdrop.
Japan stands out with surprisingly firm domestic data and rising expectations of the BoJ tightening.
Emerging markets are highly uneven, but broadly supported by a softer dollar, lower U.S. yields and cheaper oil.
Energy trades heavily; gold and rate-sensitive assets benefit from rising Fed cut odds.

United States – Strong topline, softer consumer, disinflation gaining traction

Growth:

Atlanta Fed GDPNow for Q4 is still around 4%, signalling above-trend real growth even as some regional PMIs (Chicago, Richmond, Dallas) sit deep in contraction.

Consumer:

Retail sales (Sep) slowed sharply (headline 0.2% MoM, control group –0.1%),
Conference Board confidence dropped to 88.7 from 95.5,
But jobless claims remain low (initial ~216K), and the labour market is cooling, not cracking.

Inflation:

PPI and core PPI are drifting lower; housing price indices (FHFA, Case-Shiller) show cooling house-price inflation.

Policy & markets:

Fed funds futures now price ~80–87% odds of a 25 bp cut in December,
The 10Y Treasury hovers just under 4%,
The dollar index has pulled back toward ~99–100,

Gold

surged above $4,150–4,200/oz on lower-yield and haven demand.

Message: The U.S. narrative is “growth still solid, inflation easing, Fed pivot approaching”, which is bullish for gold, duration and EM risk, but leaves manufacturing as a clear weak spot.

Europe – Disinflation and stagnation, but no acute stress

Euro area

Germany:
GDP Q3: 0.0% q/q, 0.3% y/y – essentially stagnant.
Retail sales: –0.3% MoM; Ifo expectations and business climate still weak; consumer climate deeply negative.
Inflation is easing: CPI –0.2% MoM, 2.3% YoY; import prices in deflation (–1.4% YoY).
France:
GDP Q3: +0.5% q/q, +0.9% y/y – moderate outperformance vs Germany.
Consumer spending: +0.4% MoM; inflation very low (CPI ~0.9% YoY, HICP 0.8% YoY); PPI back in deflation.
Italy & Spain:
Italy: industrial sales rebounding, non-EU trade surplus widening; inflation around 1–1.2% YoY.
Spain: inflation ~3% but stable; retail growth slowing; business confidence less negative.
Eurozone sentiment & credit:
Business & consumer survey stuck below 100,
Services sentiment positive, industry clearly negative,
M3 and loan growth around 2.8–2.9% YoY – slow but positive.

Message: The euro area is in a low-growth, low-inflation disinflationary slowdown, with services and external sectors preventing outright recession, and the ECB on course for 2025 easing, not imminent action.

United Kingdom

Demand:
Car registrations and CBI distributive trades show weak consumer and retail dynamics.

Fiscal:

Chancellor Rachel Reeves’ budget leans on ~£26bn in tax rises, adding a near-term drag on growth but improving fiscal credibility.

Markets:

5Y gilt yields around 3.8–3.9%;
GBP had its best week since early August, helped by a softer USD and “responsible” fiscal optics.

Message: UK macro is soft but not crisis-level; fiscal tightening and weak demand argue for no more BoE hikes, with cuts becoming a 2025 story as global rates move lower.

Asia – China fragile, Japan surprisingly firm, Korea two-speed

China

Industrial profits YTD (Oct): slowed to +1.9% from 3.2% – signalling margin pressure and weaker capex appetite.

Property:

China Vanke downgraded to CCC- with negative outlook, bonds under pressure; property remains a major systemic drag.

External:

Post Trump–Xi call, China bought 10+ cargoes of U.S. soybeans (~$300m), signalling a warmer trade tone.
Yuan is steadier as the dollar softens and oil prices fall into the low-60s.

Message: China remains in a “muddle-through” phase – property and profits weigh, while trade détente, cheaper energy, and a firmer CNY offer only a partial offset.

Japan

Activity:

Retail and large-scale sales are strongly positive,
Industrial production rose in October, but forecasts for Nov–Dec turn negative,
Construction orders plunged, while housing starts rebounded.

Inflation & labour:

BoJ core CPI ~2.2%, Tokyo core ~2.8% – above target,
The labour market is tight (job-offers ratio 1.18, unemployment 2.6%).

Policy & markets:

BoJ is signalling a potential rate hike as soon as next month,
Government approved a ¥21.3tn stimulus largely debt-financed,
Yen remains weak near 157 per dollar, with markets on intervention watch around 158–160,
Equities are volatile: strong tech rebounds on AI optimism, but Nikkei is still down on the month amid valuation and China-tension worries.

Message: Japan is shifting from “eternal easing” to early-stage normalisation – domestic data justify tightening, but markets are nervous about the combo of rate hikes, big stimulus and FX volatility.

Emerging Markets – no broad crisis, but very country-specific

Brazil: Lowish inflation (mid-month CPI ~4.5% YoY), unemployment edging down, but job creation slowing, credit growth moderating, and debt ratios creeping higher.
Mexico: Tight labour market, improving trade & current account, cooling core inflation – one of the cleanest EM macro stories.
India: 8.2% GDP growth, double-digit loan & M3 growth, huge FX reserves; but a widening fiscal deficit underscores a very expansionary policy mix.
Turkey: Confidence and unemployment show gradual improvement, but large trade deficits and falling FX reserves keep external risk elevated.
South Africa: Credit and money growth accelerating, PPI still low, but weaker trade surplus and wider budget deficit highlight fiscal and external fragility.
South Korea: Classic two-speed: strong consumer confidence and retail, deeply negative industrial production, BoK on steady hold at 2.5%.

Message: EMs broadly benefit from lower U.S. yields, a softer dollar, and cheaper oil, but the cycle is highly idiosyncratic – Mexico/India look robust, Turkey/SA look vulnerable, and Korea is split between households and factories.

Markets & Energy – oil heavy, gold and risk assets ride Fed cut bets

Oil:

Brent in low-$60s, WTI in high-$50s;
US inventories showed crude and product builds and higher imports.
Russia–Ukraine peace signals and the upcoming OPEC+ meeting trimmed the risk premium, but demand worries remain dominant.