Global Economic Outlook, Week 34, 2025

Global Economic Review

The International Monetary Fund’s latest projections indicate steady global expansion of 3.2% this year, albeit with notable regional dispersion. Advanced economies show signs of cooling inflation, allowing central banks to consider more flexible policy settings, while many emerging markets continue to grapple with currency volatility and elevated debt burdens.

Commodities and crypto reflected the push-pull of growth, inflation, and policy. Gold eased after a hotter PPI and a firmer dollar blunted hopes for a larger Fed cut; WTI hovered in the low $60s as U.S. inventories built and risk sentiment softened. Bitcoin briefly set new highs above $ 120,000 before retracing on the PPI release, although ETF-driven institutional demand remains a strong tailwind.

The latest inflation data indicate some tariff-related cost pressures, and July retail sales suggest that consumers are still spending. The open questions are how much of those costs firms will pass through and how much additional price growth households can absorb.

Outside the U.S., this week brought a broad slate of developments. The Reserve Bank of Australia delivered a rate cut, while Norges Bank held steady. In both the U.K. and Japan, Q2 GDP surprised to the upside. By contrast, China’s recovery remains fragile, with policymakers introducing additional stimulus to support consumption and address ongoing property-sector strains.

Meanwhile, the Eurozone showed unexpected resilience despite energy-market volatility and geopolitical uncertainty to the east. Euro-area data were mixed: June industrial production fell 0.4% m/m (-1.1% y/y), Q2 GDP grew 0.1% q/q, and July headline HICP was confirmed near 2.2%—close to target, though core pressures remain sticky. Sentiment improved at the margin in Germany’s ZEW survey, hinting at tentative stabilization.

On the Geopolitical front, a much-anticipated summit between U.S. President Donald Trump and Russian President Vladimir Putin on Friday produced no agreement to halt or resolve Russia’s war in Ukraine, even as both leaders described their Alaska talks as “productive.”

After nearly three hours of discussions, the two appeared briefly before the media to say they had made progress on unspecified issues. They offered no details and took no questions, with the typically talkative Trump ignoring reporters’ shouted queries.

“There were many, many points that we agreed on. I would say a couple of big ones that we haven’t quite got there, but we’ve made some headway,” Trump said, standing before a backdrop reading “Pursuing Peace.”

Next week (key events): U.S. Housing Starts (Tue) and Existing Home Sales (Thu); PBoC policy rate decision (Wed); Reserve Bank of New Zealand policy rate decision (Wed); Riksbank policy rate decision (Wed); Eurozone PMIs (Thu).

USA

United States Economic Review

Overview. The U.S. economy continued to expand in Week 33, with consumer demand intact and overall inflation moderating. Prices are edging higher, margins are tightening, and firms may gradually pass through costs. Still, the latest CPI and PPI prints underscore uneven disinflation and preserve policymakers’ optionality amid rising uncertainty around tariffs, pricing power, and consumer tolerance.

Inflation. July CPI rose 0.2% m/m on the headline and 0.3% m/m on the core; the core’s 12-month pace is the highest since February. Price pressure was broad-based across core goods (+0.2%) and core services (+0.4%). Headline CPI is 2.7% y/y, effectively range-bound between 2.3%–3.0% for more than a year, implying firms have largely absorbed tariff costs to date. Within the July detail, energy fell 1.1% m/m and shelter rose 0.2% m/m; core CPI firmed to 0.3% m/m, 3.1% y/y, reflecting sticky services (notably medical care and airfares).

Producer prices & pass-through. The bigger surprise was July PPI, up 0.9% m/m (3.3% y/y)—the largest 12-month increase since February—driven by services margins and a 0.7% rise in goods. Core PPI excluding food, energy, and trade advanced 0.6% m/m. A 2.0% jump in trade services (wholesaler/retailer margins) signals growing resistance to margin squeeze and raises the risk of incremental pass-through to consumers. Given tariff volatility and cautious demand, any pass-through is likely to be gradual rather than abrupt.

Consumption. July retail sales rose 0.5% m/m, and June was revised up to 0.9%, putting consumption on a firmer footing into Q3. The headline benefited from a pop in auto sales (vulnerable to tariff swings) and higher goods prices that lift nominal receipts more than volumes. The control group also rose 0.5% m/m. Promotion-heavy events and some pre-tariff buying helped, but softer discretionary trends in H1, a moderating labor market, and still-high prices keep risks tilted toward a cooler H2. Companies continue to report greater difficulty passing on costs, suggesting a measured, “test-the-waters” approach to price hikes.

Production & capacity. Manufacturing output was flat in July. Earlier pull-forward to avoid tariffs and elevated inventories are weighing on new orders, risking a near-term air pocket. The Fed’s G.17 showed total industrial production -0.1% m/m as mining and utilities dipped and manufacturing stalled (0.0% m/m). Capacity utilization edged down to 77.5%.

Sentiment & labor. University of Michigan preliminary August sentiment fell to 58.6 (from 61.7), with 1-year inflation expectations up to 4.9% and 5-year to 3.9%. Initial jobless claims eased to ~224k, consistent with a still-tight labor market. The Atlanta Fed’s GDPNow is held at 2.5% SAAR for Q3.

Markets. The data mix prompted modest de-risking: hopes for a jumbo September cut faded after PPI, while odds remain elevated for a standard 25 bps move. The dollar firmed into the PPI and retail sales releases before partially retracing after the sentiment data—capturing the tug-of-war between growth resilience and inflation risk.

United States — Weekly Outlook

With July CPI, PPI, and retail sales already in hand, attention turns to housing health, the business pulse, labor frictions, and policy signaling. Investors will parse housing starts/permits and existing home sales for evidence that higher mortgage rates and affordability constraints are containing shelter inflation, the most consequential core-services component on the disinflation path. A modest rebound in permits with flat-to-softer starts would align with gradual disinflation and temper upside risk to shelter CPI into autumn (CPI shelter rose 0.2% m/m in July).

Housing. July housing starts are expected to dip 1.6% as single-family construction remains weak and June’s 30% surge in multifamily starts gives back some momentum after total groundbreaking rose 4.6% in June. Single-family permits fell 10.9% from March to June amid soft demand and elevated new-home supply, while multifamily activity remains supported by firm rental demand in a stretched-affordability environment. The NAHB survey shows 38% of single-family builders cut prices in July, highlighting demand headwinds. Looking ahead, multifamily should stay comparatively firm, and a modest mortgage-rate reprieve could gradually aid single-family building.

Existing home sales. Resales fell 2.7% m/m in June to 3.93M SAAR, the fourth monthly decline this year and a 10-month low, as additional supply cooled price appreciation and some markets (Tampa, Austin, San Francisco) registered outright declines. Elevated valuations, high mortgage rates, and a softening labor market continue to weigh on transactions. For July, sales are expected to slip another 0.5% m/m to 3.91M SAAR; the early-August rate dip may coax buyers back later but will not affect the July print.

Business activity. Flash S&P Global PMIs (manufacturing, services, composite) at week’s end will offer a timely read on demand, pricing power, and hiring plans. After July, industrial production slipped 0.1% m/m. Signs of softer new orders or faster input-price growth would validate the PPI signal that supply-side pressures are firming even as headline inflation cools. Conversely, firm output and easing price indices would support the “clean handoff” view that allows the Fed to cut without reigniting inflation.

Labor. Thursday’s jobless claims remain a key gauge. Initial claims in the low-220Ks are consistent with a still-tight labor market; another benign print would underpin spending momentum highlighted by July’s 0.5% retail sales gain, even if sentiment is subdued. A rise in continuing claims—potentially foreshadowing slower wage-income growth into Q4—could be read as a dovish signal.

Policy signaling. Fed speakers remain in front and center. Markets currently price a high probability of a 25 bp cut at the September FOMC meeting, with diminished odds of 50 bp after the hot PPI. Emphasis on “risk management”—balancing inflation progress with growth risks—would likely cap front-end yields and support duration-sensitive assets, while a pivot toward “patience” could firm yield and the dollar into month-end.

Wall Street Expectations & Scenarios

Wall Street enters the week with cautious optimism as investors weigh improving inflation prospects against lingering growth concerns; we expect the S&P 500 to trade in a relatively narrow range with a slight downside bias. Fed communication will be the main catalyst: markets still lean toward two cuts this year, and a dovish tilt could propel a move toward year highs, while a hawkish tone would likely cap risk. Technology/AI leaders—the year’s outperformers—are vulnerable to profit-taking if guidance skews hawkish, which would pressure the broader market. After a record-heavy summer run, equities paused as the PPI surprise dented hopes for a jumbo cut; fed funds futures still imply ~90% odds of a 25 bp September move, but follow-on cuts are less certain, leaving stocks sensitive to data beats/misses and rate-sensitive sector guidance. Nasdaq technical: after a record high, a pullback is possible; confirmation would come on a sustained break below the 50% Fibonacci area near 20,000. Initial support sits near 22,250, then the 22,000 pivot, followed by 21,000.

USD Expectations & Scenarios

The DXY posted a modest weekly gain into PPI/retail as softer risk and firmer yields supported the dollar. In Week 34, the path hinges on PMIs and housing: firmer growth tilts USD higher, while a growth scare softens it. Ongoing Euro-area fragility is a background USD tailwind versus EUR unless PMIs surprise. Scenario map: strong PMIs and tame claims → curve bear-steepens, cyclicals rally, USD up vs JPY/EUR, gold softer; weak PMIs/housing → yields fall, duration rallies, USD softer vs havens (JPY) but firmer vs EM, gold bid. Volatility (VIX) is likely contained around 15–16 but could spike on data or geopolitics; thin late-summer liquidity may amplify moves. Baseline: DXY faces mild downside risk, potentially testing support near 97 if housing confirms disinflation and markets price more aggressive Fed easing, though safe-haven flows could limit weakness on geopolitical stress. Technical view: DXY is trying to hold recent gains; RSI ~46 suggests a neutral/slightly soft setup, while OBV points to interest on dips. A sustained move above 98 would target 99 and then 101 in the short to medium term.

Euro Area Economic Review & Expectations

The Eurozone continues to tread water. June industrial production fell 0.4% m/m (-1.1% y/y), with weakness broad-based across consumer goods and energy-intensive sectors. Q2 GDP grew a tepid 0.1% q/q, highlighting how net-trade and capex headwinds offset modest services strength. July HICP headline inflation was ~2.2% y/y—close to target—while underlying measures remain somewhat firmer, keeping the ECB biased toward gradualism.

Germany’s sentiment lost its faint silver lining: the ZEW Economic Sentiment index dropped to 34.7 from 52.7 in July—its first decline in four months and below the 39.5 consensus. France and Italy remain mixed, with services stabilizing but manufacturing constrained by higher input costs and soft external demand.

In the week ahead, flash PMIs will be pivotal for gauging whether manufacturing contraction is bottoming and whether services demand can offset goods softness. These releases are the first meaningful read since the late-July EU–US trade deal, under which the U.S. will levy a 15% tariff on most EU imports—including autos and parts—higher than prior rates but lower than feared, so investors will watch closely to see if confidence holds. Consensus points to a brief pause in the recent sentiment upturn: Manufacturing PMI ~49.5 (still contractionary), Services ~50.8, Composite ~50.6—levels historically consistent with subdued but positive growth rather than recession. Beyond the headlines, watch new orders and export orders (tariff sensitivity), input costs and output prices (pass-through of trade and energy costs), and employment (signals for wage momentum). From a policy perspective, with Q2 GDP and employment modestly higher and wage growth expected to cool alongside easing underlying inflation, in-line or softer PMIs would keep the door open for ECB easing in September. However, there is upside risk that early post-deal sentiment proves more resilient—especially if auto supply chains stabilize and services demand holds—in which case firmer PMIs could push the timing of a final 25 bp cut to December. Country dispersion will be key: auto-exposed Germany is most sensitive to tariffs, while services-led economies could cushion the composite if domestic demand remains sticky.

FX & Rates Implications.

EUR/USD remains a function of relative macro momentum and policy-path convexity. Into the week, a balanced PMI outcome likely caps EUR rallies below prior resistance if U.S. data hold and Fed odds stay skewed toward a standard 25 bp cut. A downside PMI surprise would likely pull Bund yields lower and widen rate differentials, weighing on the euro; a positive surprise would narrow spreads.

Technical Picture (EUR/USD). Despite easing after touching multi-month highs above 1.18, technical indicators remain constructive. Initial resistance sits near 1.1820. On the downside, a USD rebound could pressure the pair; a sustained break below 1.1570 would signal a directional shift.

Gold — Market Review & Outlook

Gold cooled last week as the PPI surprise and firm retail sales pushed real yields higher and trimmed bets on an outsized September Fed cut. Spot was on track for a ~1.5% weekly decline, hovering near $3,335/oz into Friday’s close. The dollar’s mid-week strength added pressure before easing after the University of Michigan survey. The metal’s secular appeal as a hedge against policy and geopolitical risk remains intact, but the near-term path is tied to U.S. growth momentum and the Fed’s cadence into September.

On inflation, July CPI’s steady 2.7% y/y and softer energy components were gold-friendly, but the 0.9% m/m (3.3% y/y) PPI reintroduced cost-push risk. The Fed’s reaction function is critical: consensus still looks for two cuts this year, but the balance has shifted toward a standard 25 bps move in September, moderating the “policy put” that buoyed bullion in early August.

On the data front, U.S. housing and flash PMIs will steer real yields and the dollar. Softer prints would likely lower real rates and support gold; upside surprises would do the opposite. Fed speakers are also pivotal: emphasis on “risk management” and progress on disinflation would aid bullion, while pushback against a rapid easing path would cap rallies.

Base case: with mixed U.S. data, gold likely consolidates in a broad range as markets stick with a standard September cut. If PMIs miss and jobless claims rise, real yields could fall, the dollar soften, and gold may retest recent highs with $3,400+ in view. Conversely, hot PMIs and firm housing would dim prospects for sequential cuts, lift yields and the USD, and pressure gold.

Keep an eye on the DXY and 10-year TIPS yield—they explain much of gold’s week-to-week variance. A firmer EUR on stronger Eurozone PMIs would also help bullion by pressuring the dollar.

Technical picture: XAUUSD remains range-bound between $3,300 and $3,400. Sideways trade is the base case unless price breaks decisively above or below those bands.

Crude Oil — Market Review & Outlook

Overview. Crude struggled last week. Front-month WTI hovered in the low $60s as macro headwinds—a firmer dollar after the PPI surprise and renewed growth jitters—combined with a U.S. inventory build to offset some of the support from OPEC+ supply discipline. Spot WTI ended the week around $62.

Inventories & runs. The EIA reported U.S. crude inventories +3.036 mb for the week ending Aug 9, defying an expected -0.9 mb draw and reversing the prior week’s -3.029 mb decline; total commercial petroleum inventories rose 7.5 mb. Cushing stocks edged up +0.045 mb. Refinery crude runs increased +56 kb/d, but utilization fell 0.5 percentage points, hinting at seasonal maintenance or outages. Crude imports climbed +699 kb/d. On products, gasoline inventories were -0.792 mb versus an expected -1.0 mb draw, while gasoline production was broadly flat (+10 kb/d).

Rigs & supply stance. Baker Hughes showed the U.S. oil rig count +1 to 412; the total rig count was 539, essentially steady w/w. The incremental oil-directed increase suggests producers are cautiously responding to supportive prices and stable well economics, while gas activity remains subdued amid ample inventories and softer benchmarks. Overall, the upstream posture is measured—sustaining output without broad expansion—as shale operators prioritize efficiency and shareholder returns.

Drivers. Risk sentiment and the dollar steered week-to-week price action: PPI-driven USD and yield strength pressured the energy complex before partial relief followed weaker consumer-sentiment data.

Week ahead. U.S. PMIs and housing will shape the demand outlook: stronger prints would support crack spreads and mobility proxies, while misses could revive demand-destruction worries. Weekly EIA/API reports should be watched closely—another build, especially in gasoline/distillates, would cap rallies; draws would signal late-summer demand resilience.

Scenarios. Product draws plus better PMIs and a softer USD → WTI pushes toward the high $60s as steadier refinery runs bolster demand. Another crude/product build plus a stronger dollar → WTI retests recent lows with curve flattening and heavier pressure on prices.

Technical picture. Bias remains bearish with RSI < 40 and waning buying interest, pointing to ongoing downside risk. That said, WTI has carved out support near $60; while that level holds, a recovery back above $62 remains plausible.

Bitcoin — Market Review & Outlook

Bitcoin extended its leadership among risk assets, briefly setting new all-time highs above $120K before pulling back on the hotter PPI print and a firmer dollar. The advance remains underpinned by robust spot-ETF demand and a friendlier U.S. policy backdrop; even after the late-week retracement, BTC is still sharply higher year-to-date. ETF flow and volume metrics continue to support the bull case: BTC and ETH products saw strong summer activity, with periods when ETH inflows outpaced BTC without meaningfully denting Bitcoin’s dominance. Ongoing institutional adoption—larger funds and some treasury allocations—has improved liquidity and damped event-driven volatility.

Crypto has also become more sensitive to macro data. The same PPI surprise that weighed on gold and tech cooled BTC as markets trimmed odds of a jumbo September cut; by contrast, softer sentiment data and steady GDP tracking helped cushion the pullback. Into next week, PMIs, housing prints, and the USD/real-yield trajectory are likely to drive price action; a softer dollar and lower real yields typically correlate with BTC strength.

Near-term watchlist: net ETF flows (IBIT and peers), stablecoin supply growth, funding rates, and futures basis. Also monitor regulatory headlines—policy continuity that preserves institutional access remains a key pillar of the cycle.

Technical picture: Daily indicators remain constructive. Initial support sits near $113,500, with a key pivot around $109,000. A sustained hold above support keeps the broader uptrend intact.