Global Economics Intelligence executive summary, February 2025

Trade policy is notably uncertain, with both the monthly Global Economic Policy Uncertainty Index and the Trade Policy Uncertainty Index spiking. US consumers are of two minds: sentiment differs according to whether consumers are considering their own local economy or looking further afield, a phenomenon that can perhaps be characterized as the “I am OK, but you are not OK” economy.  This economic environment finds central bank policies divided into two camps, with many playing a waiting game to see how inflation develops. India and the UK did cut interest rates this month.

The recovery among developed markets continues, while emerging markets face some challenges. The Conference Board’s February projections anticipate real GDP growth in the eurozone to be 0.8% in 2024, 0.9% in 2025, and 1.3% in 2026—revised down by –0.1 percentage points in 2025 and –0.1 percentage points in 2026 from a month ago.  Across economies, consumer confidence has dipped as inflation expectations have risen.  Inflation expectations continue to climb, reaching their highest level in almost two years.

Chinese New Year holiday was robust, hinting at a change of mood among Chinese consumers, with sales revenues in consumer-related industries climbing by 10.8% year on year. Notably, China’s New Year holiday box office receipts reached another record high as moviegoers spent $1.3 billion over the eight-day holiday period.

Indeed, inflationary pressures returned in January with most price metrics on the rise. Commodity prices grew in February, except for energy, which remained muted. However, higher tariffs on steel and aluminum, along with increased uncertainty, resulted in higher prices for industrial metals. In contrast, the FAO Food Price Index declined, primarily due to improved global supply conditions for sugar and vegetable oils, as well as lower meat prices driven by increased production and lower demand.

The price of gold—a traditional hedge in times of uncertainty—continued to surge on account of renewed inflation fears and the general geopolitical and economic environment, but Bitcoin declined in February on the back of security concerns and regulatory uncertainty, following initial optimism for the new US administration’s pro-cryptocurrency policy.

Globally, the manufacturing sector has stabilized somewhat after seven months of contraction, with sectors improving across the board, driven by production and new domestic orders. That said, companies continue to report weak external demand and reduced head count.  Services, meanwhile, are starting to show signs of softening. Across developed economies, services sectors nevertheless continued to record expansion, albeit at a reduced pace.  December unemployment rates remained stable across most surveyed economies, although India saw a 0.3-percentage-point rise.

Despite increased economic volatility, asset volatility was unchanged in February, with government bond yields remaining stable.

World trade volume increased by 1.1% in December 2024, driven by growth across imports and exports in advanced economies.

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