{"id":6997,"date":"2025-08-02T16:44:49","date_gmt":"2025-08-02T16:44:49","guid":{"rendered":"https:\/\/otetmarkets.com\/blog\/?p=6997"},"modified":"2025-08-02T16:44:49","modified_gmt":"2025-08-02T16:44:49","slug":"global-economic-outlook-august-2025","status":"publish","type":"post","link":"https:\/\/otetmarkets.com\/blog\/otet-view\/global-economic-outlook-august-2025\/","title":{"rendered":"Global Economic Outlook \u2013 August 2025"},"content":{"rendered":"\n<div class=\"wp-block-yoast-seo-table-of-contents yoast-table-of-contents\"><ul><li><a href=\"#h-introduction\" data-level=\"2\">Introduction<\/a><\/li><li><a href=\"#h-united-states\" data-level=\"2\">United States<\/a><ul><li><a href=\"#h-july-2025-economic-review\" data-level=\"3\">July\u00a02025 economic review<\/a><\/li><li><a href=\"#h-august-2025-outlook-and-expectations\" data-level=\"3\">August\u00a02025 outlook and expectations<\/a><\/li><li><a href=\"#h-q2-earnings-review-so-far\" data-level=\"3\">Q2 Earnings review so far.<\/a><\/li><\/ul><\/li><li><a href=\"#h-euro-area\" data-level=\"2\">Euro Area<\/a><ul><li><a href=\"#h-july-2025-economic-review-0\" data-level=\"3\">July\u00a02025 economic review<\/a><\/li><li><a href=\"#h-august-2025-outlook-and-expectations-0\" data-level=\"3\">August\u00a02025 outlook and expectations<\/a><\/li><li><a href=\"#h-key-data-and-events\" data-level=\"3\">Key data and events:<\/a><\/li><li><a href=\"#h-august-2025-eur-outlook\" data-level=\"3\">August\u00a02025 EUR outlook<\/a><\/li><\/ul><\/li><li><a href=\"#h-united-kingdom\" data-level=\"2\">United Kingdom<\/a><ul><li><a href=\"#h-july-2025-economic-review-1\" data-level=\"3\">July\u00a02025 economic review<\/a><\/li><li><a href=\"#h-august-2025-outlook-and-expectations-1\" data-level=\"3\">August\u00a02025 outlook and expectations<\/a><\/li><li><a href=\"#h-key-data-to-watch\" data-level=\"3\">Key data to watch:<\/a><\/li><li><a href=\"#h-gbp-outlook-for-august-2025\" data-level=\"3\">GBP Outlook for August\u202f2025<\/a><\/li><\/ul><\/li><li><a href=\"#h-china\" data-level=\"2\">China<\/a><ul><li><a href=\"#h-july-2025-economic-review-2\" data-level=\"3\">July\u00a02025 economic review<\/a><\/li><li><a href=\"#h-august-2025-outlook-and-expectations-2\" data-level=\"3\">August\u00a02025 outlook and expectations<\/a><\/li><li><a href=\"#h-data-to-watch\" data-level=\"3\">Data to watch:<\/a><\/li><\/ul><\/li><li><a href=\"#h-japan\" data-level=\"2\">Japan<\/a><ul><li><a href=\"#h-july-2025-economic-review-3\" data-level=\"3\">July\u00a02025 economic review<\/a><\/li><li><a href=\"#h-august-2025-outlook-and-expectations-3\" data-level=\"3\">August\u00a02025 outlook and expectations<\/a><\/li><li><a href=\"#h-key-indicators\" data-level=\"3\">Key indicators:<\/a><\/li><\/ul><\/li><\/ul><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-introduction\"><strong>Introduction<\/strong><\/h2>\n\n\n\n<p>Global growth regained some momentum in mid\u20112025 as major economies adapted to lingering trade tensions. Leading indicators show the world economy exiting the weak spell of early\u20112025 \u2013 HCOB\u2019s euro\u2011zone composite PMI rose to 51.0 points in July, it\u2019s highest in 11 months, as services demand improved and manufacturing approached stability. U.S. activity also strengthened, with S&amp;P Global\u2019s July composite PMI reaching an 11\u2011month high of 54.6, thanks to Service PMI improved to 55.2 (Manufacturing: 49.5). Underlying inflation eased in most regions but remained above targets; the euro\u2011zone\u2019s headline inflation held steady at 2 % in July with core inflation at 2.3 %, and U.S. consumer prices rose 2.7 % y\/y in June (Core CPI:29%). Nevertheless, geopolitical factors threaten to unseat the recovery. The U.S. administration triggered a new trade war by imposing 15 % tariffs on imports from several partners in late July, prompting retaliatory measures and spooking financial markets. Central banks remain cautious: the U.S. Federal Reserve kept rates at 4.25\u20134.50 %, citing inflation risks; the European Central Bank (ECB), having halved its key rate to 2 % by June, paused further cuts; and the Bank of Japan (BOJ) held its rate at 0.5 % while signaling the possibility of hikes later in the year. Ahead of August, investors watch whether tariffs will derail the fledgling recovery or whether policy support and resilient services sectors can sustain growth.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-united-states\"><strong>United States<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-july-2025-economic-review\"><strong>July\u00a02025 economic review<\/strong><\/h3>\n\n\n\n<p>The U.S. economy displayed mixed signals in July. Labour market. The July employment report showed non\u2011farm payrolls edged up by 73&nbsp;000, the smallest gain since April. Unemployment rose to 4.2% and the labour force participation rate ticked down to 62.2&nbsp;%, while previous months\u2019 payroll gains were revised lower. Healthcare and social\u2011assistance industries added jobs, but federal government employment fell; long\u2011term unemployment accounted for nearly a quarter of the jobless. Average hourly earnings increased 0.3&nbsp;% m\/m and 3.9&nbsp;% y\/y. The modest job growth suggested hiring momentum had stalled, reinforcing concerns that trade tensions were weighing on corporate sentiment.<\/p>\n\n\n\n<p><strong>Inflation:<\/strong> June consumer prices (latest available) rose 2.7&nbsp;% from a year earlier and 0.2&nbsp;% m\/m. Core CPI (excluding food and energy) increased 2.9&nbsp;% y\/y. Food prices climbed 3.0&nbsp;% while energy prices fell 0.8&nbsp;%. Shelter and services costs remained the primary drivers. Producer input costs remained elevated\u2014S&amp;P Global\u2019s input price index for July stood at 61.9, with services companies reporting a similar surge at 61.4 due partly to tariffs. Inflation has moderated from 2024 highs but could re\u2011accelerate as tariffs filter through.<\/p>\n\n\n\n<p><strong>Activity indicators:<\/strong> The economy rebounded strongly in the second quarter, with GDP expanding at a 3&nbsp;% annualized rate, reversing the 0.5&nbsp;% contraction in Q1. However, the surge largely reflected a record 30&nbsp;% drop in imports, which added 5&nbsp;percentage points to GDP, while underlying domestic demand grew only 1.2&nbsp;%. Consumer spending increased 1.4&nbsp;% but business investment slowed, residential investment contracted, and government spending fell. High\u2011frequency surveys painted a mixed picture. The ISM manufacturing PMI slipped to 48.0&nbsp;% (contraction), with employment at 43.4 and prices paid at 64.8, while the services PMI (S&amp;P Global flash) surged to 55.2 \u2013 the fastest pace since April 2024. Housing data remained weak; single\u2011family housing starts were 851&nbsp;000&nbsp;units (seasonally adjusted annual rate) in July, down 14.1&nbsp;% from a year earlier.<\/p>\n\n\n\n<p><strong>Policy:<\/strong> At its July 30 meeting, the Federal Open Market Committee (FOMC) kept the target range for the federal funds rate at 4.25\u20134.50&nbsp;%. Chair Powell emphasized the need for \u201cmore data\u201d before considering cuts and noted that inflation risks persist amid new tariffs. Two dissenting officials argued for an immediate cut. Fiscal policy has become more confrontational. President Donald Trump signed an executive order imposing 15&nbsp;% tariffs on most foreign goods and dismissed the Bureau of Labor Statistics commissioner after the lackluster jobs report. These measures rattled financial markets and raised questions about data credibility. Despite political pressure, the Fed signaled that it would remain data\u2011dependent and guard against inflation.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-august-2025-outlook-and-expectations\"><strong>August\u00a02025 outlook and expectations<\/strong><\/h3>\n\n\n\n<p>Looking ahead to August, analysts expect U.S. growth to slow as trade frictions and policy uncertainty bite. The sharp decline in imports that boosted Q2 GDP is unlikely to repeat; consumption may soften under higher prices, and businesses may curb investment as tariffs raise costs.<\/p>\n\n\n\n<p>Markets now see more than 80&nbsp;% probability of a Fed rate cut in September as weak hiring and trade tensions dampen confidence. However, if inflation re\u2011accelerates, the Fed may wait until later in the year. Fiscal policy remains unpredictable; additional tariffs or retaliatory measures could further disrupt supply chains and push prices higher. The housing market is expected to remain depressed due to high mortgage rates and rising construction costs. Corporate earnings season in August will offer insight into margins and the ability of firms to pass on tariff\u2011related costs. Overall, the U.S. economy is likely to expand at a slower pace, with growth driven mainly by services and government spending.<\/p>\n\n\n\n<p>August is not a busy month in the economic calendar, still, we have some key economic data to watch, including:<\/p>\n\n\n\n<p><strong>NFP Report (Aug 1) &#8211;<\/strong> Labour data already published on Friday. July\u2019s jobs report fell short of expectations. Nonfarm payrolls increased by just 73,000, missing forecasts and following significant downward revisions for June and May. The unemployment rate edged up to 4.2% (from 4.1%), while labor force participation declined for the third straight month.<\/p>\n\n\n\n<p><strong>ISM services PMI (Aug&nbsp;5) and manufacturing PMI (Aug&nbsp;1 final) \u2013<\/strong> manufacturing is expected to remain below 50, though the new orders index may stabilize if supply chains adjust. Services activity is likely to stay robust, but the employment component will be watched for signs of layoffs.<\/p>\n\n\n\n<p><strong>July CPI (Aug&nbsp;12) \u2013<\/strong> markets anticipate another uptick because tariffs on consumer goods and strong wage growth will feed through. If headline inflation rises above 3&nbsp;%, the Fed will likely delay rate cuts. Conversely, a soft reading could reinforce expectations for a September cut.<\/p>\n\n\n\n<p><strong>July retail sales (Aug&nbsp;15) \u2013<\/strong> important to gauge consumer resilience. Analysts forecast modest growth, but weakness in discretionary categories (e.g., autos) would signal caution.<\/p>\n\n\n\n<p><strong>FOMC minutes (Aug&nbsp;20) \u2013<\/strong> investors will scrutinize discussions on the impact of tariffs and the threshold for rate cuts.<\/p>\n\n\n\n<p><strong>Labour market data \u2013<\/strong> initial jobless claims and the August employment report (Sept&nbsp;6) will reveal whether July\u2019s weak payrolls were a blip or the start of a trend. Most economists expect moderate job gains of around 100,000.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-q2-earnings-review-so-far\"><strong>Q2 Earnings review so far.<\/strong><\/h3>\n\n\n\n<p>As of early August 2025, the U.S. Q2\u20112025 earnings season is roughly two\u2011thirds complete, and results have been stronger than many analysts expected. According to LSEG data, about 317 S&amp;P&nbsp;500 companies had reported results through July&nbsp;30, meaning roughly 63&nbsp;% of the index\u2019s constituents have released their earnings. Those reports show that year\u2011on\u2011year earnings growth for the index is tracking at about 9.8&nbsp;%, up from 5.8&nbsp;% projected at the start of July.<\/p>\n\n\n\n<p>The win\u2011rate\u2014the share of companies beating analysts\u2019 consensus forecasts\u2014has been unusually high. LSEG\u2019s data show 81&nbsp;% of reporting S&amp;P&nbsp;500 companies have topped earnings expectations, well above the 76&nbsp;% average seen over the past four quarters. A separate tally cited by Wall&nbsp;Street&nbsp;Horizon and FactSet put the \u201cbeat\u201d rate at around 80&nbsp;% on both earnings and revenue, which is better than the 1\u2011, 5\u2011, and 10\u2011year averages. Strong results from mega\u2011cap technology firms\u2014particularly Microsoft, Meta Platforms, and Alphabet\u2014have been a major driver of this positive surprise. These companies continue to benefit from heavy investment in artificial\u2011intelligence infrastructure, bolstering both earnings and investor sentiment.<\/p>\n\n\n\n<p>Outside the large\u2011cap index, earnings results have also been supportive but a bit more mixed. Smaller U.S. companies have delivered profit growth, yet win rates are closer to their historical average and guidance is more cautious given new tariffs and softer domestic demand. Globally, the earnings season just began in late July; Wall&nbsp;Street&nbsp;Horizon noted that around 14&nbsp;% of more than 11,000 companies worldwide had reported results by July&nbsp;31 and that the peak weeks of reporting would occur from July&nbsp;28 to Aug&nbsp;15, when over 2,000 reports were scheduled per week. Investors, therefore, still face a busy calendar of corporate releases in August, with particular focus on the remaining \u201cMagnificent Seven\u201d technology giants (Apple and Amazon report in the first week of August, while Nvidia reports on Aug&nbsp;27). Overall, Q2 results so far point to solid earnings momentum and an unusually high beat rate for the S&amp;P&nbsp;500, though markets remain sensitive to trade\u2011policy developments and any signs of consumer or labour\u2011market weakness.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-euro-area\"><strong>Euro Area<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-july-2025-economic-review-0\"><strong>July\u00a02025 economic review<\/strong><\/h3>\n\n\n\n<p>Euro\u2011zone growth showed tentative improvement in July yet remained fragile. Activity indicators. The preliminary HCOB composite PMI rose to 51.0 in July, an 11\u2011month high, as services activity improved and manufacturing approached stability. The services PMI climbed to 51.2 from 50.5, while the manufacturing PMI increased to 49.8, its highest since July&nbsp;2021. Output remained stagnant, but new business stopped declining for the first time since May&nbsp;2024. Germany\u2019s manufacturing index reached a 35\u2011month high of 49.1, and Ireland continued to lead with a reading above 53. Inflationary pressures eased; services input prices fell to a nine\u2011month low.<\/p>\n\n\n\n<p>Economic Growth: Eurostat\u2019s flash estimate showed second\u2011quarter GDP grew 0.1&nbsp;% quarter\u2011on\u2011quarter in the euro area and 0.2&nbsp;% in the EU, a sharp slowdown from 0.6&nbsp;% growth in Q1.<\/p>\n\n\n\n<p>Inflation and labour market: Eurostat reported that headline inflation in July remained at 2&nbsp;%, with core inflation at 2.3&nbsp;%. Services\u2019 inflation slowed to 3.1&nbsp;% while goods\u2019 inflation picked up slightly. The unemployment rate for June (latest data) stood at 6.2&nbsp;% for the euro area and 5.9&nbsp;% for the EU, hovering near multi\u2011decade lows. These figures underscored labour\u2011market resilience despite slowing output.<\/p>\n\n\n\n<p>Policy: The European Central Bank halved its key rate to 2% by June and, faced with inflation at target, opted to keep interest rates unchanged in July. Officials noted that trade tensions with the U.S. \u2013 which resulted in a new 15&nbsp;% tariff on most EU goods \u2013 could dampen growth yet also reduce price pressures. Markets now see less than a 50&nbsp;% chance of another ECB rate cut this year. Fiscal policy may become more supportive: Germany is preparing extra budget spending to offset trade\u2011related drag.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-august-2025-outlook-and-expectations-0\"><strong>August\u00a02025 outlook and expectations<\/strong><\/h3>\n\n\n\n<p>The euro\u2011zone recovery is expected to continue at a gentle pace. Manufacturing will probably remain near 50 in August as firms benefit from the U.S.\u2013EU trade deal, which reduces tariffs to 15&nbsp;% and reduces uncertainty. New orders and backlogs may stabilize, though export sales could remain soft due to slower global demand. Services activity should stay in mild expansion but may be dampened by high prices. Analysts forecast Q3 GDP growth of about 0.3&nbsp;% quarter\u2011on\u2011quarter, driven by domestic consumption and government spending.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-key-data-and-events\"><strong>Key data and events:<\/strong><\/h3>\n\n\n\n<p><strong>HCOB final services PMI (Aug&nbsp;5) \u2013<\/strong> expected to confirm the preliminary 51.2 reading. Any downward revision could signal a slower rebound.<\/p>\n\n\n\n<p><strong>ECB account of July meeting (Aug&nbsp;8) \u2013<\/strong> may reveal how officials view trade risks and the bar for further cuts. Markets expect the ECB to hold rates at 2&nbsp;% through the year end unless inflation drops significantly below target.<\/p>\n\n\n\n<p><strong>Eurostat industrial production (Aug&nbsp;14) and retail sales (Aug&nbsp;6) \u2013<\/strong> will show whether manufacturing improvement translates into output and whether consumers continue to spend amid high prices.<\/p>\n\n\n\n<p><strong>July Inflation (Aug 20) &#8211;<\/strong> It is expected to see slight changes in data, CPI can slightly increase to 2.1%, while Core CPI is expected to slightly slow to 2.3%.<\/p>\n\n\n\n<p><strong>July unemployment (Aug&nbsp;30) \u2013<\/strong> likely to remain around 6.2&nbsp;%, but signs of labour\u2011market cooling could influence ECB policy.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-august-2025-eur-outlook\"><strong>August\u00a02025 EUR outlook<\/strong><\/h3>\n\n\n\n<p>Recent news reports describe a choppy summer for the common currency. After surging 14&nbsp;% in the first half of 2025 to a four\u2011year high of $1.1830, the euro ran into trouble at the end of July. Much of the earlier rally was driven by massive, long positions ($18.4&nbsp;billion) in euro futures and investor hopes that Germany\u2019s fiscal\u2011spending shift and U.S. trade tensions would Favor Europe. But those positions were tested when the United States and EU signed a trade deal on 28&nbsp;July that included a 15&nbsp;% tariff on most EU goods. The euro dropped almost 2% in July, its biggest fall since April. By 29\u201330&nbsp;July, the euro was hovering around $1.15\u20131.14 and on track for its first monthly loss of 2025, while traders shifted focus to the Federal Reserve\u2019s policy meeting. Analysts noted that much of the move was driven by stretched positioning rather than fundamental deterioration, and some described it as \u201ca reality check\u201d for euro bulls.<\/p>\n\n\n\n<p>The outlook for August hinges on monetary\u2011policy expectations and the evolving trade landscape. The European Central Bank cut rates to 2% by June and has signaled that it will now pause; July euro\u2011area inflation was steady at 2.0&nbsp;% with core inflation 2.3&nbsp;%, supporting the view that no further cuts are imminent. ING notes that Germany\u2019s extra budget spending and the fading threat of a full\u2011blown trade war mean the bar for another cut this year has risen. Markets therefore see less than a 50&nbsp;% chance of another ECB cut in 2025.<\/p>\n\n\n\n<p>On the U.S. side, the Fed kept rates at 4.25\u20134.50&nbsp;% on 30&nbsp;July and Chairman Powell reiterated a patient stance, supporting the dollar. However, a weak U.S. jobs report on 1&nbsp;August\u2014payrolls rose only 73,000\u2014led traders to increase bets on Fed rate cuts; the dollar index fell 1.2&nbsp;% and the euro jumped 1.37% to $1.1571, its biggest daily gain since April.<\/p>\n\n\n\n<p>Given those cross\u2011currents, strategists expect the euro\u2011dollar to trade in a wide $1.14\u20131.18 range in August. Rabobank\u2019s Jane Foley says there was \u201ctoo much optimism\u201d in euro pricing and that unwinding of long positions may continue. On the other hand, ING and State Street argue that the late\u2011July sell\u2011off was a correction and that the euro\u2019s underlying uptrend remains intact as European growth prospects improve. Much will depend on incoming data: investors will watch euro\u2011zone GDP figures, August flash PMIs and the 20&nbsp;Aug inflation report, while U.S. markets look to the next payroll release and progress on trade talks with China. If U.S. data remain soft and the Fed signals openness to cuts, the euro could regain ground. Conversely, resilient U.S. growth or renewed tariff threats would likely keep the dollar firm and cap euro gains.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-united-kingdom\"><strong>United Kingdom<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-july-2025-economic-review-1\"><strong>July\u00a02025 economic review<\/strong><\/h3>\n\n\n\n<p>Britain entered the second half of 2025 with sluggish growth and a weakening labour market.<\/p>\n\n\n\n<p>Labour market: The Office for National Statistics\u2019 July labour market overview (covering March\u2013May) showed the employment rate at 75.2&nbsp;%, unemployment at 4.7&nbsp;% and economic inactivity at 21.0&nbsp;%. Payrolled employees declined by 0.3&nbsp;% y\/y, and vacancies fell for the 36th consecutive period. Average total pay grew 5.0&nbsp;%, outpacing inflation and resulting in real pay growth of 1.1&nbsp;%. The softening labour market likely signals a forthcoming uptick in unemployment as businesses respond to higher labour costs.<\/p>\n\n\n\n<p>Inflation and growth: Official July CPI data will be released on Aug&nbsp;20; in June, CPI was 3.6&nbsp;% y\/y, above the Bank of England\u2019s (BoE) 2&nbsp;% target, while core inflation remained around 4&nbsp;%. High energy tariffs and increased social\u2011security contributions kept price pressures elevated. Monthly GDP data for June showed the economy growing at only 0.1&nbsp;% q\/q; business surveys suggest July growth slowed further. S&amp;P Global\/CIPS preliminary July composite PMI slipped to 51.0, with the employment gauge dropping to its lowest since February. The services PMI fell to 51.2, while the manufacturing PMI improved to 48.2 but still signaled contraction. Final data released on Aug&nbsp;1 showed manufacturing output picked up and expectations reached a five\u2011month high, yet the sector continued to cut jobs amid cost pressures. Companies attributed the deterioration in employment to the government\u2019s April rise in social\u2011security contributions and to tariffs imposed by the U.S.<\/p>\n\n\n\n<p>Policy: The BoE\u2019s Monetary Policy Committee is widely expected to cut the Bank Rate by 25&nbsp;basis points to 4.00&nbsp;% at its Aug&nbsp;7 meeting. Governor Catherine Mann has acknowledged that the labour market is cooling and that growth risks outweigh inflation risks, though hawkish members worry that inflation, currently 3.6&nbsp;%, remains above target. The BoE cut rates four times over the previous 12&nbsp;months and has signaled a gradual approach. Fiscal policy remains uncertain; the new Labour government plans to present an autumn budget focusing on infrastructure and green investment, but the recent increase in employer national insurance contributions has dampened business confidence.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-august-2025-outlook-and-expectations-1\"><strong>August\u00a02025 outlook and expectations<\/strong><\/h3>\n\n\n\n<p>August will test whether Britain can avoid slipping into recession. GDP growth is expected to flatline in Q3 amid weak business investment and cautious consumers. Real wages should continue rising, but higher social\u2011security costs and tariffs will weigh on corporate margins. The new government\u2019s budget will set the medium\u2011term fiscal trajectory; markets expect modest stimulus but limited scope for large spending due to high debt. The British pound may remain under pressure against the euro and dollar due to looser monetary policy and political uncertainty. Overall, the UK faces a delicate balance between easing inflation and preventing a deeper downturn.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-key-data-to-watch\"><strong>Key data to watch:<\/strong><\/h3>\n\n\n\n<p><strong>BoE interest\u2011rate decision (Aug&nbsp;7) \u2013<\/strong> markets expect a 25&nbsp;bp cut to 4.00%. Investors will monitor voting patterns and guidance on future cuts; a three\u2011way split, like May, is possible.<\/p>\n\n\n\n<p><strong>PMI surveys (Aug&nbsp;5 for services\/manufacturing final) \u2013<\/strong> manufacturing may edge closer to 50 as new orders stabilize, while services activity could cool if consumers trim spending.<\/p>\n\n\n\n<p><strong>June\u2013August labour\u2011market statistics (Aug&nbsp;12) \u2013<\/strong> important for confirming whether unemployment is rising. Vacancy trends and pay growth will influence policy.<\/p>\n\n\n\n<p><strong>July CPI (Aug&nbsp;20) \u2013<\/strong> headline inflation is forecast to decline modestly due to falling energy prices, though tariffs and wage growth may keep core inflation near 4%. A higher\u2011than\u2011expected reading could slow the pace of BoE cuts.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-gbp-outlook-for-august-2025\"><strong>GBP Outlook for August\u202f2025<\/strong><\/h3>\n\n\n\n<p>Sterling posted its worst monthly decline since the Truss crash in September 2022, tumbling about \u20133.7\u202f% against the dollar and sliding from $1.378 in early July to around $1.33 by month-end, highlighting a sharp reversal after outperforming earlier in the year.<\/p>\n\n\n\n<p>The decline intensified after the U.S.\u2010EU trade agreement on 28\u202fJuly, which spurred a surge in U.S. equities and a stronger dollar, pushing GBP\/USD to 10\u2011week lows near $1.3316.<\/p>\n\n\n\n<p>Weak UK retail and business surveys and fading fiscal confidence, added pressure. Gilts fell, and attention turned to the Bank of England\u2019s next policy decision amid rising recession fears.<\/p>\n\n\n\n<p>As in early August, Sterling steadied around $1.320\u20131.325 into Friday, supported by soft U.S. jobs data, which rattled dollar bullishness. However, heightened volatility persists as markets await August nonfarm payrolls and retail sales in both the U.S. and the UK.<\/p>\n\n\n\n<p>Investor uncertainty over the BoE\u2019s direction\u2014while the Fed remains on hold\u2014provides only muted support. The BoE is almost universally expected to cut rates by 25\u202fbp to 4.00\u202f% on 7\u202fAugust, although the committee remains divided on the path ahead. Among economic data, any surprises on tax or debt policy may sway markets, given rising skepticism over UK credibility.<\/p>\n\n\n\n<p>Historically, August is the weakest month for GBP\/USD, with average losses around \u20130.5\u202f%\u2014a trend traders may dovetail with forward positioning.<\/p>\n\n\n\n<p>Sterling is expected to trade in a broad $1.30\u20131.34 range this month. However, MUFG\u2019s consensus suggests a spot close around $1.3233 into Q3, with potential upside to mid\u2011$1.35s if the U.S. dollars falter or UK yields outperform.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-china\"><strong>China<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-july-2025-economic-review-2\"><strong>July\u00a02025 economic review<\/strong><\/h3>\n\n\n\n<p>China\u2019s economy lost momentum in July as both official and private surveys signaled renewed weakness.<\/p>\n\n\n\n<p>Purchasing managers\u2019 indices: The National Bureau of Statistics\u2019 manufacturing PMI slipped to 49.3 from 49.7 in June \u2013 the lowest since April \u2013 with new export orders at 47.1 and the employment index still in contraction. Production growth slowed as high temperatures, flooding, and weaker global demand hit factories. The non\u2011manufacturing PMI (services and construction) fell to 50.1, and the services PMI dropped to 50.0, indicating near\u2011stagnation. S&amp;P Global\u2019s Caixin manufacturing PMI, which focuses on smaller private firms, fell to 49.5 (from 50.4 in June), marking the fourth contraction in five months. Firms reported declining output and new orders, cost\u2011cutting job reductions, and rising input prices due to government efforts to stop price wars.<\/p>\n\n\n\n<p>Growth data: Official Q2 figures released in mid\u2011July showed GDP expanding 5.2&nbsp;% y\/y. However, domestic demand remained weak: industrial production grew 5.1&nbsp;% y\/y in June, retail sales rose only 2.7&nbsp;% and fixed\u2011asset investment increased 3.6&nbsp;% in the first half of the year (Reuters summary). Youth unemployment remained high; a Reuters report indicated it rose to around 17&nbsp;% in July. The property sector was in recession, with floor\u2011space sales falling and developers facing liquidity stress.<\/p>\n\n\n\n<p>Policy: Chinese authorities acknowledged the slowdown and pledged to \u201ccorrect disorderly competition\u201d and support consumption via childcare subsidies. In late July, the Politburo promised targeted stimulus to support property and manufacturing, though large\u2011scale fiscal easing remains constrained by high local\u2011government debt. Monetary policy stayed accommodative; the People\u2019s Bank of China cut the reserve\u2011requirement ratio for small banks earlier in the year but held policy rates in July. Beijing also signed a trade deal with Washington under which most tariffs remain at 15&nbsp;%, offering slight relief compared with fears of much higher duties.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-august-2025-outlook-and-expectations-2\"><strong>August\u00a02025 outlook and expectations<\/strong><\/h3>\n\n\n\n<p>Prospects for August hinge on whether policy support can offset headwinds from trade tensions and a weak property sector. Economists forecast growth to slow to around 4.5&nbsp;% y\/y in the second half of 2025. Stimulus measures such as tax breaks, mortgage rate cuts, and government bond issuance may help stabilize investment and housing, but structural headwinds persist. The export sector could benefit from the U.S.\u2013China trade deal, though tariffs remain high. Foreign investor sentiment remains cautious amid regulatory unpredictability and geopolitical tensions. Overall, China is likely to experience a modest cyclical recovery in services but continued weakness in manufacturing and property.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-data-to-watch\"><strong>Data to watch:<\/strong><\/h3>\n\n\n\n<p><strong>Inflation (Aug&nbsp;9) \u2013<\/strong> consumer prices have been hovering around zero; deflation risks may persist due to weak demand and falling pork prices. Producer prices are likely to remain in negative territory. Low inflation gives the central bank room ease if growth falters.<\/p>\n\n\n\n<p><strong>Industrial production, retail sales, and fixed\u2011asset investment (Aug&nbsp;15) \u2013<\/strong> analysts expect industrial output growth to remain around 5%, while retail sales growth may stay below 3% amid fragile consumer confidence. A pickup would signal that stimulus measures are gaining traction.<\/p>\n\n\n\n<p><strong>Unemployment (surveyed rate) \u2013<\/strong> the government stopped publishing the youth unemployment rate after it exceeded 21% in 2023, but analysts estimate it remains above 16%. Any improvement could boost sentiment.<\/p>\n\n\n\n<p><strong>PMI surveys (Aug&nbsp;31 official, Sept&nbsp;1 Caixin) \u2013<\/strong> markets will watch whether manufacturing climbs back above 50. Improvement will depend on export orders and the property sector.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-japan\"><strong>Japan<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-july-2025-economic-review-3\"><strong>July\u00a02025 economic review<\/strong><\/h3>\n\n\n\n<p>Japan\u2019s economy showed mixed signals in July.<\/p>\n\n\n\n<p><strong>Economic Growth:<\/strong> S&amp;P Global\u2019s manufacturing PMI fell to 48.8 from 50.1 in June, slipping back into contraction as uncertainty over U.S. trade policy weighed on orders. New export orders contracted, and employment growth slowed. In contrast, the services PMI rose to 53.5 \u2013 a robust expansion \u2013 lifting the composite PMI to 51.5. Firms cited strong domestic demand for tourism and hospitality, but cost pressures remained due to rising food and energy prices.<\/p>\n\n\n\n<p><strong>Inflation and wages:<\/strong> The national core consumer price index, which excludes fresh food, rose 3.3% y\/y in June, down from 3.7% in May but still above the BOJ\u2019s 2% target for the 39th straight month. The core CPI (excluding energy and fresh food) increased 3.4% y\/y. Food prices jumped 8.2%, while service\u2011sector inflation climbed 1.5&nbsp;%, reflecting wage growth. Labour market data for June showed the unemployment rate was steady at 2.5%. Real wages returned to positive growth due to record pay rises in spring wage negotiations, but higher prices continued to erode purchasing power.<\/p>\n\n\n\n<p><strong>Policy:<\/strong> At its July&nbsp;31 meeting, the BOJ kept the short\u2011term policy rate at 0.5&nbsp;%. The board raised its inflation forecast for the current fiscal year to 2.7% and projected inflation of 1.8% in fiscal&nbsp;2026. Governor Kazuo Ueda delivered a more optimistic outlook, saying the economy was making progress toward the inflation target and that a rate hike later in the year remained possible. The BOJ noted that a trade deal with Washington reducing U.S. tariffs on Japanese cars and other goods to 15% removed a major uncertainty. However, the bank also warned that rising food costs could have second\u2011round effects on inflation and trimmed its assessment of consumption.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-august-2025-outlook-and-expectations-3\"><strong>August\u00a02025 outlook and expectations<\/strong><\/h3>\n\n\n\n<p>Investors will focus on how quickly Japan\u2019s manufacturing sector can recover and whether services momentum persists. Analysts anticipate the BOJ will continue to normalize policy gradually. A rate hike could come as early as October if inflation and wages remain strong, but Governor Ueda emphasized that the bank would scrutinize data for several months. The yen may strengthen if markets price in a hike, but safe\u2011haven flows may also lift the currency due to global uncertainty. Japanese equities could benefit from the trade deal and stable domestic demand; however, weak exports and slowing Chinese growth pose headwinds. Overall, Japan is poised for modest growth driven by services and tourism, with the risk of a downturn if global trade conditions deteriorate.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-key-indicators\"><strong>Key indicators:<\/strong><\/h3>\n\n\n\n<p><strong>&nbsp;July au Jibun Bank Services PMI (Jul 5)-<\/strong> it&#8217;s expected to stay unchanged at 53.5 and confirms the service sector strength.<\/p>\n\n\n\n<p><strong>July labour\u2011market data (Aug&nbsp;30) \u2013<\/strong> economists expect the unemployment rate to remain near 2.5&nbsp;%. A rise could delay BOJ tightening.<\/p>\n\n\n\n<p><strong>GDP and GDP Price Index (YoY) (Q2) (Aug 15) &#8211;<\/strong> After the first quarter missing estimates and losing the growth forecast, falling by -0.2%, in the second quarter, we expect the Japanese economy to extend by 0.3%.<\/p>\n\n\n\n<p><strong>August PMI surveys (Aug&nbsp;22 and Sept&nbsp;2) \u2013<\/strong> manufacturing may stabilize as firms benefit from the trade deal. Services growth could ease slightly but remain above 50.<\/p>\n\n\n\n<p><strong>July core CPI (Aug&nbsp;23) \u2013<\/strong> expected to stay above 3&nbsp;% but gradually decline. Food price trends will be seen as signs of persistent inflation.<\/p>\n\n\n\n<p><strong>June household spending and July retail sales (Aug&nbsp;27) \u2013<\/strong> will show whether wage gains translate into consumption. Signs of weakness would support a cautious policy stance.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Introduction Global growth regained some momentum in mid\u20112025 as major economies adapted to lingering trade tensions. Leading indicators show the world economy exiting the weak spell of early\u20112025 \u2013 HCOB\u2019s euro\u2011zone composite PMI rose to 51.0 points in July, it\u2019s highest in 11 months, as services demand improved and manufacturing approached stability. U.S. activity also [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":6998,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[],"class_list":["post-6997","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-otet-view"],"_links":{"self":[{"href":"https:\/\/otetmarkets.com\/blog\/wp-json\/wp\/v2\/posts\/6997","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/otetmarkets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/otetmarkets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/otetmarkets.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/otetmarkets.com\/blog\/wp-json\/wp\/v2\/comments?post=6997"}],"version-history":[{"count":1,"href":"https:\/\/otetmarkets.com\/blog\/wp-json\/wp\/v2\/posts\/6997\/revisions"}],"predecessor-version":[{"id":7000,"href":"https:\/\/otetmarkets.com\/blog\/wp-json\/wp\/v2\/posts\/6997\/revisions\/7000"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/otetmarkets.com\/blog\/wp-json\/wp\/v2\/media\/6998"}],"wp:attachment":[{"href":"https:\/\/otetmarkets.com\/blog\/wp-json\/wp\/v2\/media?parent=6997"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/otetmarkets.com\/blog\/wp-json\/wp\/v2\/categories?post=6997"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/otetmarkets.com\/blog\/wp-json\/wp\/v2\/tags?post=6997"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}