After a strong finish to 2024, published data worldwide confirmed weaker growth in January, followed by a slight recovery in February in some economies, while European economies continue to face challenges.

In the U.S., the Fed’s preferred measure of inflation showed price growth easing further in line with the trend. However, confidence data indicate that consumers remain anxious about future inflation, as discussions of higher tariffs continue to dominate headlines.

Outside the U.S., the Bank of England (BoE) cut rates by 25bps, Mexico lowered interest rates to 9.50%, the Reserve Bank of Australia (RBA) reduced rates to 4.1%, and the Reserve Bank of New Zealand (RBNZ) cut rates by 50bps to 3.75%. Meanwhile, central banks in China and Russia held rates at record lows and highs, respectively.

Beyond economic data, Trump’s proposed tariffs, geopolitical tensions, and political uncertainties have also played a significant role in market movements.

U.S. Economic Outlook for March 2025

As of March 2025, the United States economy exhibits a complex blend of resilience and emerging challenges. Key indicators and policy shifts provide insight into the current economic landscape. As we enter the last month of the first quarter, the Philadelphia Fed’s GDP expectation stands at 1.9% for this quarter, the Wall Street Journal is expecting a 2.2% growth, and Wells Fargo Economics’ growth expectation is 2.4% for the quarter.

On a broader scale, the Organization for Economic Co-operation and Development (OECD) projects U.S. GDP growth to decelerate from 2.6% in 2024 to 1.6% in 2025. This slowdown is expected despite monetary policy easing aimed at cushioning the economy. Concurrently, inflation rates remain above the Federal Reserve’s 2% target, raising concerns about potential stagflation—a scenario characterized by high inflation and sluggish growth.

U.S. Economic Review: January – February 2025

Economic indicators reveal a mixed economic environment in the U.S. Some sectors show resilience, while others face challenges, particularly in consumer confidence and spending. The ongoing slowdown in consumer activity, coupled with uncertainties from trade policies and inflation pressures, suggests that the economy may continue to face headwinds in the coming months. Monitoring these trends is essential for a comprehensive understanding of the U.S. economic landscape as we move further in 2025.

Employment Report: In January 2025, the U.S. economy added 143,000 jobs, falling short of the anticipated 170,000. This marks the 49th consecutive month of job growth, though the pace of job creation was slower than expected. The unemployment rate decreased to 4%, down from 4.1% in December.

Inflation: The U.S. Consumer Price Index (CPI) showed a slight easing in January 2025, with inflation rates cooling to 3.1% year-over-year, down from 3.3% in December. This aligns with the Federal Reserve’s ongoing efforts to manage inflationary pressures.

Purchasing Managers’ Index (PMI):

• The Services PMI for January registered 52.8, below the expected 54.0. This indicates continued expansion in the services sector but at a decelerated pace. All four subindexes—Business Activity, New Orders, Employment, and Supplier Deliveries—remained in expansion territory.
• The U.S. Manufacturing PMI for February 2025 came in at 49.5, signaling a contraction in the manufacturing sector.
• The ISM Manufacturing PMI for January was 50.9%, signaling a marginal expansion in manufacturing activity after 26 months of contraction. Employers added 3,000 manufacturing jobs during the month.

Consumer Spending: In January, consumer spending unexpectedly declined by 0.2%, marking the largest drop in four years. This decline has raised concerns about the future direction of economic growth.

Consumer Confidence: The Conference Board Consumer Confidence Index fell to 98.3 in February 2025, marking a sharp decline from January’s 105.3. The drop reflects growing concerns over economic conditions, inflation pressures, and potential interest rate policies.

Retail Sales: Retail sales in January 2025 saw a 0.2% decline, marking the largest drop in consumer spending since 2021. This decline is attributed to higher inflation and uncertainty surrounding future interest rate moves.

Trade Policies: Recent trade measures, including tariffs on imports from Canada, Mexico, Europe, and China, have added uncertainty to the economic outlook, potentially impacting various sectors of the economy.

U.S. Economic Predictions for March 2025

In response to persistent inflationary pressures, the Federal Reserve initiated a rate-cutting cycle in late 2024, reducing the federal funds rate by 50 basis points in September and an additional 25 basis points in November. While the Fed held rates in the January meeting, projections suggest further gradual cuts throughout 2025, aiming to balance the dual objectives of controlling inflation and sustaining economic growth.

On the international relations front, the current administration has implemented significant trade measures, including a 25% tariff on steel and aluminum imports from all countries, effective March 12, 2025. These actions are intended to bolster domestic production but have raised concerns about escalating consumer prices and potential retaliatory measures from trading partners.

On the geopolitical front, with the Russia-Ukraine war entering its fourth year, President Trump is attempting to broker a deal with Russia to end the war, which, if successful, could significantly impact the global economy, including the U.S. economy and Wall Street.

In March 2025, several key economic data releases are scheduled to provide insights into the U.S. economy’s performance. We will have February PMIs on March 3 and 4, the Beige Book on March 4, the NFP and overall labor market report for February on March 7, February inflation data on March 12, retail sales on March 17, and the Fed’s monetary policy meeting on March 18-19. Additionally, U.S. housing data and the Leading Index will be released on March 20.

These releases will offer valuable insights into employment trends, inflation dynamics, productivity, and regional economic conditions. Monitoring these data points will be essential for assessing the current state and trajectory of the U.S. economy. As for the Fed meeting, there is less chance of any change in interest rates. The Fed is concerned about inflation recovery, while the short-term effects of tariffs in the market could also increase prices, but the impact is still unclear. This means the Fed may choose to hold steady and observe for now. On the data front, after the weakness in March retail sales, we expect a significant recovery in February retail sales, especially with a 0.9% gain in consumer incomes in January. Labor market data have been acceptable in recent weeks, and this trend is expected to continue, with the unemployment rate likely staying at 4.0% in February.

Wall Street and USD in March

Financial markets have experienced heightened volatility. The Dow Jones 30 closed 2.8% lower at its February high but finished the month only 0.5% lower than its opening price. The Nasdaq Composite recorded a nearly 6% decline from the February high, but like the Dow Jones, it also closed 0.5% lower than its February opening. As for the S&P 500, the main Wall Street index closed almost at the same level as its opening, with numerous volatile days.

On the currency front, while the U.S. Dollar Index started March with a big jump to 109.70, it fell more than 2% and ended February lower than 107.50.

This turbulence is attributed to concerns over economic growth, tariff policies, and geopolitical risks, which are expected to continue and put pressure on the stock markets. For the U.S. Dollar Index, given the uncertainty and the expected “wait-and-see” policy of the Fed, we are cautiously positive about holding the current levels in March as well.

Generally, the U.S. economy navigates a landscape marked by slowing growth, persistent inflation, and policy-induced uncertainties. The interplay between monetary easing, trade tensions, and consumer behavior will be pivotal in shaping the economic trajectory in the coming months.

UK, Overall Economic Condition and March Outlook!

The United Kingdom’s economic landscape is characterized by a blend of fiscal policy shifts, consumer spending challenges, and geopolitical considerations, while the practical results of the Conservative government’s policies continue to be followed with concern. In October 2024, Chancellor Rachel Reeves unveiled a budget featuring significant fiscal measures, including £40 billion in tax increases, marking the most substantial rise since 1993. The budget plan included National Insurance Contributions, as employers’ NICs are set to increase by 1.2% to 15%, effective from April 2025, with the threshold decreasing from £9,100 to £5,000. Allocations include a £22.6 billion increase in the health budget, a £5 billion investment in housing, and £6.7 billion in capital investment for education, aiming to rebuild over 500 schools. In a forward plan, starting in 2028, personal income tax and national insurance thresholds will adjust in line with inflation.

While the government is trying to support employees and consumers, consumer expenditure has remained subdued, with no growth in inflation-adjusted spending during Q4 2024, and a minimal increase since late 2019. Factors such as the pandemic’s aftermath, the cost-of-living crisis, elevated inflation, and rising interest rates have led consumers to adopt cautious spending habits, resulting in a higher savings rate compared to pre-pandemic levels. The UK government still needs increased consumer spending to stimulate economic growth.

On geopolitical and defense considerations, in response to the ongoing Russia-Ukraine conflict, Chancellor Reeves proposes utilizing over £2 billion from frozen Russian assets to support Ukraine’s military efforts. Additionally, the National Wealth Fund’s remit is set to expand to encompass defense sector support, moving beyond its traditional focus on infrastructure. These measures underscore the UK’s commitment to international stability, despite domestic fiscal constraints.

Overview of Key UK Economic Data Points from February 2025

Inflation: The UK’s inflation rate showed some signs of easing in February 2025, but it remained above the Bank of England’s target. The inflation rate increased to 3% in January from 2.5% in December 2024. Inflation in the United Kingdom has averaged 2.82% from 1989 to 2025, reaching an all-time high of 11.1% in October 2022 and a record low of -0.1% in April 2015.

GDP: The UK economy posted slight growth in Q4 2024, avoiding contraction. Quarter-over-quarter GDP rose by 0.1%, outperforming expectations and the previous quarter’s stagnation. Year-over-year GDP grew by 1.4%. December’s monthly GDP increased by 0.4%, well above the 0.1% forecast.

Labor Market: The UK labor market showed signs of cooling in February 2025, with unemployment ticking up slightly to 4.2%. Despite this, job vacancies remained high in some sectors, indicating tight labor conditions.

Retail and Consumer Spending: Retail sales data indicated a sharp slowdown in consumer spending, down 0.5% in January 2025. While there was some recovery in February, high inflation and rising borrowing costs have kept consumers cautious, limiting their willingness to spend.

Trade and Export Data: February’s trade data showed a continued imbalance, with the UK facing challenges in its export sector, particularly within manufacturing. However, the overall trade deficit narrowed to £17.45 billion, better than the expected £18.60 billion shortfall. The non-EU trade deficit also declined to £6.10 billion, improving from the previous £7.19 billion deficit. The data suggests resilience in the UK economy despite ongoing economic challenges, with positive momentum in growth and trade balance improvements.

Housing Market: The UK housing market showed signs of cooling, with property prices experiencing minimal increases. Demand remained weaker due to high mortgage rates and tighter lending conditions. This contributed to subdued consumer confidence and a slowdown in the housing sector. The Nationwide House Price Index (HPI) rose 0.4% month-over-month in February. On a yearly basis, house prices grew 3.9% year-over-year, slightly above expectations. The data suggests continued resilience in the UK housing market despite broader economic uncertainties.

UK Economic Outlook for March 2025

The UK economy in March 2025 is navigating a challenging landscape shaped by fiscal consolidation, subdued consumer spending, and geopolitical complexities. The government’s fiscal strategy aims to balance public sector investment with fiscal prudence, yet weak consumer demand remains a key headwind to economic momentum. The retail sector faces continued pressure as households adjust spending behavior in response to elevated inflation and higher borrowing costs. Meanwhile, the UK’s proactive engagement in global defense initiatives highlights the interplay between domestic fiscal policy and geopolitical imperatives.

Following the 25-basis-point rate cut on February 25, the Bank of England is expected to adopt a wait-and-see approach, with no immediate adjustments anticipated in the March 20 policy meeting. Inflation concerns remain prominent, and policymakers will carefully assess incoming data before committing to further rate adjustments. The central bank faces the difficult task of balancing price stability with economic growth, particularly as fiscal tightening weighs on broader demand.

The outlook for March 2025 suggests persistent inflation, sluggish economic expansion, and cautious consumer sentiment will continue to constrain growth prospects. Given these conditions, sentiment around UK equities and the British pound remains fragile, with market participants closely monitoring monetary policy developments and macroeconomic indicators.

Eurozone Economic Review and Outlook for March 2025

In March 2025, the Eurozone’s economic landscape is shaped by a gradual recovery in domestic demand, cautious monetary policy adjustments, and emerging external challenges. According to the OECD, GDP growth is projected to strengthen from 0.8% in 2024 to 1.3% in 2025, driven by improving domestic demand. Private consumption is expected to benefit from rising wages in a resilient labor market and sustained growth in real disposable incomes. Private investment is anticipated to gain momentum due to more favorable credit conditions, while public investment continues to be supported by Recovery and Resilience Facility funds. However, escalating trade tensions between the U.S. and the EU remain a key market driver.

Among economic developments, Trump’s tariffs have become the most pressing issue in financial markets. Trade tensions between the United States and the European Union have escalated following President Donald Trump’s recent tariff announcements. On February 10, 2025, Trump imposed a 25% tariff on all steel and aluminum imports, including those from the EU. He also floated a 25% “reciprocal” tariff on European cars and other goods, further fueling uncertainty in global trade.

European stock markets extended their declines on the final trading day of February as market sentiment deteriorated after President Trump confirmed that tariffs on Mexican and Canadian goods would take effect the following week. The situation remains fluid, with ongoing discussions and potential negotiations between U.S. and EU officials. The possibility of a trade war poses risks to economic stability on both sides, making diplomatic engagement crucial in the coming weeks.

Review of the Latest EU Economic Data

GDP – In Q4 2024, the Eurozone’s GDP grew by 0.1% quarter-on-quarter, down from the previous quarter’s 0.4% growth. On a year-on-year basis, the GDP increased by 0.9%, aligning with expectations and remaining unchanged from the previous quarter, indicating a stable but subdued economic expansion.

Labor Market – In December 2024, the seasonally adjusted unemployment rate in the Eurozone stood at 6.3%, while the EU-wide unemployment rate edged up to 5.9%, compared to 5.8% in November 2024. The data reaffirms the resilience of the labor market, despite marginal fluctuations.

Economic Activity – Eurozone PMI data for February 2025 indicates stabilizing economic conditions, with the HCOB Eurozone Composite PMI remaining unchanged at 50.2. The Manufacturing PMI improved slightly to 47.3, though it continues to signal contraction in the sector. Meanwhile, the Services PMI declined to 50.7 from 51.5, reflecting slower growth in services, though it remains in expansionary territory. The data suggests a mixed performance across sectors, with services maintaining growth while manufacturing continues to struggle.

Inflation – Final January inflation data confirmed that Core CPI in the Eurozone stood at 2.7% year-over-year, while headline CPI rose to 2.5% annually, slightly above the previous 2.4%. However, on a monthly basis, inflation declined by 0.3%, marking a significant reversal from the 0.4% increase recorded in December. This suggests easing price pressures as the year begins.

Eurozone Outlook for March 2025

The Eurozone faces potential external challenges, particularly from the proposed U.S. tariffs on EU imports. The announcement of a 25% tariff has already led to significant declines in European economies. These measures could negatively impact both European and U.S. economies, especially if the EU retaliates, potentially escalating trade tensions and dampening economic growth. Despite these risks, the Eurozone shows signs of economic strengthening, supported by recovering domestic demand and strategic investments. However, cautious monetary policy and careful attention to external trade risks remain crucial to maintaining this growth trajectory.

The European Central Bank (ECB) has reduced its deposit facility rate by a cumulative 75 basis points since June 2024, with projections suggesting a further decrease to 2% by the end of 2025. This policy aims to stimulate aggregate demand while ensuring that inflation pressures remain subdued. However, ECB officials have cautioned against excessive rate cuts driven by market expectations, emphasizing the need for data-driven decisions. As a result, market participants and investors are anticipating a 25-basis point rate cut in the next ECB meeting, scheduled for Thursday, March 6.

The Euro Stoxx 50 Index has increased by 11.9% since the latest U.S. election, outperforming the S&P 500’s 3% increase. Alongside potential banking reforms and substantial investments in key sectors like electric vehicles and semiconductors, there is cautious optimism about a resolution to the Ukraine-Russia war. This optimism suggests a strong transformation in Europe’s economic dynamics.

China’s economic conditions, and March Outlook!

The Asia-Pacific (APAC) region presents a complex economic landscape, influenced by both internal dynamics and external pressures.

China’s Composite PMI rose to 51.1 (previously 50.1), signaling mild economic growth. The Manufacturing PMI edged up to 50.2 (previously 49.1, expected 50.0), returning to expansion, while the Non-Manufacturing PMI increased slightly to 50.4 (previously 50.2, expected 50.3), reflecting stable services and construction activity. This uptrend is primarily attributed to improving domestic demand despite the impact of new U.S. tariffs, including a 25% tariff on Chinese goods, effective March 4.

China’s central bank kept its key loan prime rates unchanged in the February meeting, navigating economic growth challenges and a weakening yuan. The People’s Bank of China left the one-year loan prime rate at 3.10% and the five-year rate at 3.60%, both record lows following past cuts. Markets are now turning their attention to potential fiscal stimulus.

China’s inflation data for January 2025 also showed some improvement, with the Consumer Price Index (CPI) rising by 0.7% month-over-month, missing the expected 0.8% increase. Year-on-year, CPI grew by 0.5%, signaling a modest recovery in consumer prices. However, factory gate prices remain under pressure, as the Producer Price Index (PPI) declined by 2.3% year-over-year. The data suggests a gradual improvement in consumer demand, though deflationary pressures persist in the industrial sector.

China’s parliament is anticipated to approve key economic targets during its annual meeting starting March 5, aiming for a growth target of approximately 5% and plans for increased fiscal stimulus to bolster the economy.

Japan, Current condition review and March 2025 expectations!

Japan’s economy presents a blend of positive momentum and emerging challenges. The economy expanded in the fourth quarter of 2024, supported by robust domestic demand. Consumer inflation reached 4% in January 2025, indicating persistent price pressures.

The Bank of Japan’s Core CPI rose to 2.2% year-over-year, signaling ongoing inflationary pressures. Economic activity showed mixed signals, with the Coincident Indicator improving by 1.0% after a 1.4% fall in November but falling short of the 1.4% forecast. The Leading Index climbed to 108.3 from 107.5 in November, suggesting a moderate outlook for future economic conditions. While inflation remains above target, the uneven economic indicators may influence the BoJ’s policy stance in the coming months.

Looking ahead, Japan’s economy faces a complex landscape. The BoJ’s hawkish stance and interest rate hikes may influence currency markets, potentially affecting export competitiveness. Strategic investments in technology and green energy are poised to drive future growth, but demographic shifts necessitate ongoing policy attention. Balancing these factors will be crucial for sustaining economic stability and growth in the coming months. Japan is addressing the “2025 Problem,” with a significant portion of its population entering advanced age. Innovations are emerging to cater to the needs of the elderly, including health supplements and specialized food products.

The Bank of Japan (BoJ) has shifted towards a hawkish stance, ending its decade-long stimulus and raising short-term interest rates. These measures aim to achieve a sustainable 2% inflation target, supported by solid wage growth and domestic demand. On Wednesday, March 19, the BoJ will hold its next monetary policy meeting and interest rate decision. Market participants do not expect any changes in monetary policies.