What to Watch in the Global Economy: September 2025

Estimated reading time: 16 minutes

September isn’t just another month on the calendar, a pressure points for the world economy. A wave of central bank decisions, fresh economic data, and key energy updates are lined up to hit in quick succession. Any one of them could reset the outlook for markets and policy into year-end.

Global Economic Review — August 2025

In August, developed economies posted modest but unexpected growth, even as disinflation trends varied widely. Oil markets remained range-bound, with Brent crude unable to break above the high-$70s amid persistent supply concerns. Attention shifted toward September’s central bank meetings, with the U.S. Federal Reserve expected to maintain a cautious stance on rate cuts.

In the U.S., services remained strong while manufacturing was mixed. Inflation progress slowed, keeping the Fed’s next move data dependent. Bond yields reacted sharply to new data, though equity markets held onto a “soft landing” view. The Euro area showed signs of stabilization, supported by improving PMIs and controlled inflation. The U.K. delivered a rate cut and shifted toward a data-driven policy approach, even as inflation remained patchy.

  

Japan saw cooling inflation, though still above the BoJ’s target, with labor markets tight and industrial activity slowing. The Bank of Japan stayed cautious on tightening. China’s recovery remained uneven, with weak property and export sectors limiting momentum. Targeted stimulus continued, avoiding broader interventions.

Commodity markets reflected this cautious macro tone. Crude oil was capped by strong non-OPEC supply and soft demand. Base metals tracked China’s fluctuations, while gold benefited from rate and inflation uncertainty. Globally, rate markets remained sensitive, equities favored quality growth, and FX stayed data driven.

Geopolitics & Trade War — August 2025 Review

August brought renewed turbulence to global trade and geopolitics. A U.S. federal court ruled most 2025 White House tariffs illegal but allowed them to stay in place pending appeal, keeping legal uncertainty high. Simultaneously, the U.S. ended its $800 duty-free threshold on small parcels, raising costs for e-commerce. While extending its tariff truce with China through early November, the U.S. also maintained select Section 301 exclusions.

U.S. actions rippled globally. Mexico signaled higher tariffs on Chinese goods ahead of the 2026 USMCA review. India flagged possible WTO action over new U.S. metal tariffs. Global trade bodies warned of mounting economic drag from ongoing tariff disruptions.

In Europe, trade tensions with China escalated. The EU kept hefty duties—up to 45%—on Chinese EVs, with failed price negotiations increasing the risk of retaliation. The sector remains politically sensitive and vulnerable to countermeasures.

Geopolitically, the Russia–Ukraine war intensified, prompting new EU sanctions focused on enforcement and logistics. Middle East shipping risks and China–Philippines tensions also worsened. Taiwan continued flagging the cost of PLA military drills.

Overall, trade complexity is rising. Companies are shifting to near-shoring and building localized inventories. With legal rulings, sanctions, and flashpoints ahead, markets remain cautious, pricing in elevated policy and geopolitical risks into September.

Global Economic Outlook — September 2025

September is shaping up to be a critical month for global markets, with a packed schedule of central bank meetings, key economic data releases, and major energy reports. These events will collectively influence policy paths, market sentiment, and economic forecasts as the year enters its final quarter.

Monetary policy takes center stage, with major central banks—the ECB (Sept 11), the U.S. Federal Reserve (Sept 16–17), the Bank of England (Sept 18), and the Bank of Japan (Sept 18–19)—set to guide financial conditions. Their decisions will hinge on a dense slate of incoming data, including the U.S. jobs report (Sept 5), CPI (Sept 11), eurozone HICP (Sept 2), and UK inflation (Sept 17).

Energy markets also face a pivotal week mid-month, with the EIA, IEA, and OPEC releasing key updates on oil supply, demand, and pricing amid tight crude conditions.

In the U.S., the Fed is expected to maintain a cautious tone on rate cuts, watching labor and inflation closely. Softer data could push yields lower and weaken the dollar, while inflation surprises may trigger a hawkish shift. In Europe, a slightly hawkish ECB tone could support the euro and bond yields, while the Bank of England remains data-sensitive after its August cut. In Japan, even subtle policy shifts could trigger global market reactions, especially around yield-curve control.

China’s latest economic signals, particularly PMIs and credit data, will be key for Asian risk sentiment. Targeted stimulus remains likely unless the yuan weakens further.

Emerging market central banks—from Brazil to Taiwan—are navigating these global crosscurrents while managing domestic pressures.

Overall, September’s policy and data calendar will shape global asset pricing, central bank trajectories, and energy market direction. Investors and businesses must stay nimble amid heightened volatility and shifting macro signals.

U.S. Economic & Market Summary — August 2025

August was marked by renewed optimism across U.S. markets, with equities reaching fresh highs and the dollar weakening as expectations shifted toward a possible Federal Reserve rate cut in September. A combination of weak job growth, dovish signals from Fed Chair Jerome Powell, and steady inflation data contributed to this market-friendly turn.

Economic data reinforced the soft-landing narrative. Q2 GDP was revised up to a strong 3.3% annualized pace, driven largely by resilient consumer spending. Retail sales and personal consumption both rose 0.5% in July. Meanwhile, disinflation continued: core PCE inflation rose just 0.3% month-over-month and increased to 2.9% annually. Despite solid spending, consumer sentiment dipped in both the Conference Board and University of Michigan surveys, reflecting rising concerns over job prospects and price pressures.

Labor market signals weakened. July’s non-farm payrolls added only 73,000 jobs—well below previous months—while unemployment edged up to 4.2%. This slowdown in hiring added weight to the case for a more cautious Fed stance. Manufacturing data was mixed, with a drop in headline durable goods orders but strength in core capital goods, indicating stable business investment. Housing remained firm, supported by limited supply, even as new home prices eased slightly.

On Wall Street, the S&P 500 and Dow hit new records on August 28 before a tech-led pullback. The S&P 500 ended up 1.9%, the Dow gained 3.2%, and the Nasdaq rose 1.6%. Broader participation was evident, with the equal-weight S&P 500 rising 2.7% for its fourth straight monthly gain. Volatility fell sharply—the VIX hit multi-year lows—reflecting investor confidence in a soft-landing scenario and dovish Fed outlook.

Inflation data reinforced the market’s calm. July’s PCE came in at 2.6%, with the core at 2.9%, aligning with expectations. Powell’s Jackson Hole speech on August 22 signaled a patient approach to policy, further anchoring rate cut expectations.

In currency markets, the dollar lost ground. The DXY fell nearly 2% to 97.8, and the WSJ Dollar Index dropped 1.74%. The British pound and other major currencies posted gains as rate differentials shifted.

Yields responded accordingly. The two-year Treasury yield dropped to 3.59%, while the 10-year hovered around 4.22%, steepening the curve modestly and reinforcing confidence in a soft economic landing heading into fall.

U.S. Economic Outlook – September 2025

Markets head into September with eyes firmly at the Federal Reserve’s September 17 FOMC meeting, where a 25-basis-point rate cut is widely expected. With around 90% probability priced in (per CME FedWatch), investors are focused less on the cut itself and more on the Fed’s updated dot plot, economic projections, and Powell’s messaging. Recent signs—slowing job growth (July NFP: +73K) and 2.9% core PCE inflation—have laid the groundwork for policy easing, but any hawkish tone from the Fed could dampen the market’s dovish enthusiasm.

The macro picture remains mixed. Growth momentum persisted through Q2 with 3.3% GDP (SAAR), but much of that strength came from favorable import/tariff dynamics that may fade in Q3. Manufacturing remains in contraction (ISM: 48), and services are barely growing (ISM: 50.1). Job and inflation data in early September will be crucial in confirming the Fed’s direction. Soft prints (NFP under 100K, core CPI +0.2%) would support further easing. Hot labor or inflation could disrupt that path.

Markets rallied through August on expectations of Fed easing, but seasonal caution remains for equities. Volatility is low, but risks are building. Tariff pass-through, weaker global demand, and sudden swings in financial conditions could tighten the outlook, regardless of a modest rate cut.

Key data and events to watch this month include:

• Jobs week (Sep 2–5): A weak NFP and softer wages would solidify rate cut expectations.
• Inflation checkpoint (Sep 10–11): CPI and PPI data will be crucial. Sticky services inflation could complicate easing.
• FOMC meeting (Sep 17): A 25 bp cut with a “data-dependent” outlook is the base case; the tone and dot plot will matter more than the cut itself.
• Real economy follow-through (Sep 22–26): Housing, capex, and GDP internals will provide a read on Q3 strength.
• Confidence indicators (Sep 29–30): Consumer sentiment and pending home sales will help gauge demand heading into Q4.

The base case remains a soft-landing path, but markets are looking for any inflation or labor surprises that might throw the Fed’s easing trajectory of course.

UK Economic Outlook — September 2025

The UK enters September in a state of cautious optimism, navigating a complex mix of softening labor demand, sticky inflation, and early signs of economic stabilization. The Bank of England’s 25-basis-point rate cut in August—the first since the current tightening cycle began—brought the Bank Rate down to 4.0%, signaling the start of a potential, albeit gradual, easing path. However, the move was narrowly passed (5–4 vote), reflecting deep caution among policymakers amid lingering inflation concerns.

Headline CPI rose to 3.8% in July, with services inflation staying elevated at 5.0%, driven by persistent cost pressures in air travel and transport. This stickiness in inflation, combined with still-strong wage growth (regular pay up 5.0% y/y), suggests the BoE will proceed slowly with further cuts, remaining highly data-dependent. Labor market signals are mixed: unemployment rose to 4.7%, job vacancies fell sharply, and the employment rate slipped, indicating cooling demand—but not enough to fully ease inflation worries.

Economic growth held up better than expected. Q2 GDP rose 0.3% quarter-on-quarter (1.2% y/y), thanks to gains in services and construction, while real GDP per capita edged higher by 0.2%. Business sentiment improved, with the composite PMI hitting a one-year high of 53.0 in August, driven by a rebound in services. Manufacturing, however, remained weak at 47.3, reflecting ongoing challenges in that sector.

Retail remains a drag. The CBI’s Distributive Trades Survey showed sales declining for an eleventh consecutive month, with inflationary pressures still squeezing household spending. The official retail sales data for July was delayed, adding to uncertainty around the true strength of consumer demand.

Looking ahead, markets are focused on a cluster of key economic events in mid-September that could create significant volatility. Within a 48-hour window (Sept 16–18), the UK will release labor market data, CPI, and the BoE’s next rate decision—just as the U.S. Federal Reserve holds its own pivotal FOMC meeting. This overlap heightens the potential for sharp moves in global rates, currencies, and investor sentiment.

The British pound, while supported by stronger services activity, remains capped by expectations of only slow policy easing. The front end of the gilt curve is particularly sensitive to inflation surprises and wage data, while steeper curves could emerge if growth stabilizes and the pace of rate cuts slows.

September’s outcome hinges on several data points:

• A cooler-than-expected CPI or slowing wage growth could reinforce the BoE’s dovish stance and pressure the pound.
• Sticky services inflation or firm labor data might delay further easing.
• Broader cross-market impacts are likely, especially in short-term yields and currency markets, given the tight alignment between UK and U.S. data releases and policy decisions.

In short, September is loaded with risk catalysts. For UK markets, everything from BoE minutes to wage growth to consumer data will play into expectations for the path ahead. Investors should brace for volatility, particularly in sterling, gilts, and sectors sensitive to rating expectations.

Eurozone Economic Outlook — September 2025

The eurozone enters September into a fragile but stable state, with modest growth, containing inflation, and a policy outlook increasingly shaped by near-term data. The European Central Bank (ECB) is expected to hold rates steady at its September 10–11 meeting, but policymakers remain focused on persistent services inflation and external risks, particularly energy and trade tensions. Against this backdrop, investors will be watching key data releases closely—particularly the flash HICP on September 2 and updated PMIs—to gauge the direction of inflation and growth into the autumn.

August economic data painted a picture of cautious resilience. Headline inflation remained stable at 2.0% in July, while core inflation settled around 2.3%. Services continued to contribute most to inflationary pressure, while disinflation in goods helped ease overall price growth. Financial markets interpreted the numbers as reinforcing the ECB’s wait-and-see stance.

Growth, while positive, slowed. Q2 GDP rose just 0.1% quarter-on-quarter (1.4% year-on-year), a step down from earlier momentum. Germany continues to underperform, while France and Spain provided a lift. Labor markets remain a key strength, with unemployment at 6.2% as of June, helping sustain household income despite waning hiring momentum.

Business activity showed signs of improvement in August, with the HCOB Composite PMI rising to 51.1—led by services, even as manufacturing continued to contract. Retail volumes increased slightly in June (+0.3%), suggesting a modest consumption base for Q3, although consumer sentiment remains weak. The European Sentiment Indicator (ESI) dropped to 95.2, and consumer confidence fell further to –15.5, reflecting subdued demand expectations.

Minutes from the ECB’s July meeting highlighted internal debate over inflation risks and trade volatility. The bank’s Consumer Expectations Survey indicated that 12-month inflation expectations remain anchored at 2.6%, reinforcing the need for policy flexibility. Germany’s GfK consumer confidence index fell to –23.6 in late August, underscoring deep-rooted uncertainty in the euro area’s largest economy.

Looking ahead, markets expect the ECB to maintain optionality in its policy approach, with any rate changes deferred until clearer economic signals emerge. The ECB’s tone will be data-dependent, with a focus on services prices and employment. A benign inflation report could lead to bull-flattening in eurozone rates, while any upside surprises, particularly in services inflation—could pressure the front end of the yield curve.

The euro remains modestly supported by soft-landing hopes, though further gains may be limited without stronger consumption or sentimental data. Equities and credit saw mild relief from improved PMIs, but investors remain cautious, especially with retail and industrial output still underperforming.

Key data to watch in September includes:

• Sept 2: Flash HICP (August)
• Sept 3: Final PMIs and July PPI
• Sept 4: Retail trade (July)
• Sept 10–11: ECB policy meeting
• Sept 16–17: Industrial production and final HICP
• Sept 22: Consumer confidence (September)

With growth soft and inflation hovering near target, the ECB is likely to maintain its steady hand. September’s data will determine whether patience continues—or if policy pivots are needed heading into Q4.

China Economic Outlook — September 2025

China heads into September with a fragile, uneven recovery marked by resilient services and external trade, counterbalanced by persistent deflationary forces, a weak property sector, and cautious credit conditions. Policymakers continue to favor selective easing over broad stimulus, signaling a strategy of stabilization rather than aggressive reacceleration.

August Data Recap

Inflation remained muted. July CPI was flat year-on-year, and core inflation rose just 0.8%, with food prices dragging down overall consumer prices. Services’ inflation held steady at 0.5%. Meanwhile, producer prices continued their descent, with the PPI dropping 3.6% year-on-year, underscoring the pressure on industrial margins and the broader economy’s pricing power.

Despite deflationary pressures, real activity showed some resilience. Industrial production grew 5.7% year-on-year, fueled by manufacturing and infrastructure. Retail sales rose 3.7%, indicating a cautious but ongoing consumer recovery. Fixed asset investment remained sluggish (+1.6% year-to-date), as gains in infrastructure and manufacturing were overshadowed by a 12% drop in real estate investment. The urban unemployment rate held steady at 5.2%.

Trade surprised to the upside, with exports jumping 7.2% and imports rising 4.1%, likely boosted by front-loading ahead of global tariff changes. However, this momentum may prove short-lived. Credit data was more concerning: July saw a rare contraction in new yuan loans (–¥50 billion), suggesting weak demand and cautious lending despite overall TSF expanding by ¥1.16 trillion.

Policy Outlook

The People’s Bank of China (PBOC) is expected to keep its Loan Prime Rate (LPR) unchanged at the September 22 fixing, favoring targeted liquidity injections and sector-specific relief over rate cuts. Policymakers are signaling continued reliance on fiscal tools and structural credit programs to support the economy—particularly in manufacturing upgrades and housing support—without triggering excessive leverage or currency pressure.

Sector Trends

The recovery remains bifurcated. The official manufacturing PMI remained in contraction at 49.3 in August, while the non-manufacturing PMI barely expanded at 50.1. In contrast, the S&P Global services PMI rose to 52.6, highlighting ongoing strength in consumer-facing sectors. However, the property market remained under pressure, with new-home prices in 70 major cities falling 0.3% month-on-month and 2.8% year-on-year. Some stabilization was noted in tier-1 cities amid targeted easing.

Market Implications

• Rates & CNY: Mild CPI and continued PPI deflation support selective easing. Bond yields are expected to remain range-bound, and the yuan may weaken slightly on dovish policy signals.
• Equities: Strength in services and high-tech sectors could support domestic-focused and upgrade-driven names, while real estate and construction-linked equities remain vulnerable.
• Credit: Subdued capex and weak upstream pricing put pressure on corporate margins, reinforcing a market preference for firms with strong balance sheets.
• Commodities: Ongoing PPI deflation aligns with soft demand and pricing in upstream sectors. Investors should watch industrial production data for real-time demand signals.

Key September Data to Watch

• Sep 1: Caixin Manufacturing PMI (August)
• Sep 3: Caixin Services PMI
• Sep 8: Trade data
• Sep 10: CPI/PPI
• Sep 15: Industrial output, retail sales, FAI, home prices
• Sep 22: LPR fixing
• Sep 30: Official NBS PMIs

The overall outlook remains one of cautious management—selective easing, gradual disinflation, and a policy stance closely tethered to evolving credit and sector dynamics.

Japan Economic Outlook — September 2025

Japan begins September with cautious momentum, as the economy continues to rely on services strength to offset manufacturing volatility. Inflation remains sticky beneath the surface, the labor market is tight, and the Bank of Japan (BoJ) is maintaining a patient, data-driven stance. Markets are looking closely to see whether recent disinflation and resilient services activity can hold as the country heads into Q4.

August Recap: Inflation, Labor, Activity

Tokyo’s August CPI showed a dip in headline inflation to 2.6% and core inflation to 2.5%, largely due to subsidies easing energy prices. However, the “core-core” inflation gauge—excluding food and energy—remained close to 3.0%, highlighting persistent underlying pressures. These sticky price dynamics continue to limit the BoJ’s room to normalize policy aggressively.

The labor market remained one of the tightest among developed economies. The unemployment rate fell to 2.3%, and the job-to-applicant ratio stayed firm at 1.22. While hiring momentum has cooled slightly, structural labor shortages and wage negotiations remain central to the BoJ’s inflation outlook.

On the production side, July industrial output fell 1.6% month-on-month. However, manufacturers expect a 2.8% rebound in August, followed by a potential dip in September. Retail sales grew by just 0.3% year-on-year, reflecting still-cautious household spending amid cost-of-living pressures.

Sector Trends & PMIs

August PMI data revealed a continued services-led expansion. The composite PMI rose to 51.9, with services firmly above the 50 threshold and manufacturing narrowly below it at 49.9. Domestic consumption, particularly in services and travel-related sectors, has become the engine of growth. Export-focused industries like autos and electronics remain pressured by weak global demand and an uncertain currency outlook.

BoJ Policy Outlook

The BoJ is expected to leave its policies unchanged at the September 18–19 meeting. With national CPI data (August) due the same day, the focus will be on the tone of the policy statement and commentary on wage growth, core-core inflation, and bond purchases. The central bank remains cautious, especially with core-core inflation sticky and upstream costs subdued.

The BoJ is unlikely to alter yield curve control or interest rates without clearer signals of sustained, demand-driven inflation. Its messaging is expected to emphasize patience and flexibility while acknowledging ongoing price pressures.

External Sector

Exports will be a key indicator of stabilization of external demand, especially in machinery and electronics. Services trade, boosted by inbound tourism, remains a positive offset. The August trade data (due Sep 30) will be closely watched for signs of renewed export momentum.

Market Implications

• Rates/JGBs: Mild inflation and falling producer prices favor short-end JGBs. However, sticky core-core inflation could steepen the curve if the BoJ signals less accommodation ahead.
• FX (JPY): The yen remains sensitive to front-end yield spreads. A dovish BoJ combined with soft CPI could keep the yen range-bound or slightly weaker unless global yields fall.
• Equities: Domestic names tied to services and consumption are likely to outperform. Exporters remain vulnerable until industrial production and currency trends stabilize.

Key September Data

• Sep 1: Manufacturing PMI
• Sep 8: Q2 GDP (2nd estimate)
• Sep 10–12: Producer prices, industrial production (revised)
• Sep 18–19: BoJ decision, National CPI
• Sep 26: Tokyo CPI
• Sep 30: Retail sales and trade stats

Japan’s September outlook hinges on the services sector holding firm, manufacturing recovering modestly, and the BoJ navigating inflation with caution.