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GLOBAL SYNTHESIS

  • US policy actions and data continue to set the tone across global markets.
  • Talks of a new “reciprocal tariff” regime and discussions on a Ukraine ceasefire are center stage.
  • Recent US data show a firmer January CPI and weaker retail sales, which some analysts believe may be overstating both inflationary pressures and consumption slowdown.

US OUTLOOK

  • Inflation & Retail Sales: January data revealed core CPI inflation rising 0.446% m/m (seasonally adjusted), while retail sales declined by 0.9% m/m overall (with a 0.8% m/m drop in the control group). Nevertheless, economists downplay these trends, suggesting some temporary effects at work.
  • Tariff Developments: The US has announced 25% tariffs on aluminum and steel (effective 12 March), while a broader “reciprocal tariff” approach is under study with a 1 April decision date targeted.
  • Monetary Policy & Growth: The Fed is expected to keep rates on hold at its March meeting. Meanwhile, Q1 GDP projections hover around 2.5% annualized.

EURO AREA OUTLOOK

  • Tariff Dynamics: The EU’s average import tariffs on US goods are lower than the US tariff rates on EU imports. Heightened talk of reciprocal tariffs raises concerns about greater trade fragmentation.
  • Potential Countermeasures: The EU is evaluating up to €2.83bn in retaliatory tariffs on US goods in response to recent US measures.

Key Indicators:

  • Goods trade surplus with the US stands at 1.2% of EA GDP for 2023 (€177bn).
  • Euro area employment grew 0.1% q/q in Q4, while industrial production fell by 1.1% m/m in December.
  • Q4 GDP growth in the euro area was revised upward to 0.1% q/q.

UNITED KINGDOM OUTLOOK

  • Growth & Demand: The economy expanded just 0.1% in Q4 2024, driven more by public spending than private domestic demand.
  • Monetary Policy Views: MPC members have voiced differing opinions on the appropriate pace of rate adjustments.
  • Economic Readings: Unemployment data for December are likely to show an uptick to 4.5%. January headline CPI inflation could rise to 2.8%.
  • Trade & the US: Britain’s annual trade with the US nears £200bn, making tariff developments especially relevant.

JAPAN OUTLOOK

  • Tariff Exposure: Japan is not a primary focus of the new US tariff measures, though any global escalation in trade tensions could have knock-on effects.
  • Monetary Policy & Wages: The administration is expected to support the Bank of Japan’s normalization without pushing for immediate rate hikes. Meanwhile, annual wage negotiations in Japan point to a likely 5% pay raise in FY25.
  • Trade Stats: Japan supplies approximately 4% of US steel imports and 0.1% of aluminum, with an estimated 3.2% average tariff on US imports, compared to 1.4% from the US on Japanese exports.

CHINA OUTLOOK

  • Real Estate Slowdown: China’s property market saw a rapid cooling in Q1, including a double-digit plunge in home sales. Secondary market prices also dipped in January, adding to expectations that the sector may drag on 2025 growth.
  • Inflation & Policy: January CPI edged up 0.5% y/y, partly reflecting Lunar New Year effects. PPI is predicted to remain in deflation this year.
  • Monetary Easing Constraints: The People’s Bank of China (PBoC) faces a delicate balance between supporting the economy and managing exchange-rate stability.

EMERGING ASIA OUTLOOK

  • Reciprocal Tariffs & India: US plans for reciprocal measures remain uncertain; however, India is notably vulnerable due to relatively higher tariff rates on US imports.
  • Broader Factors: Non-tariff elements and non-reciprocal factors further broaden potential regions affected.
  • Central Banks: Trade worries contributed to BSP’s unexpected policy hold. Bank Indonesia is expected to proceed with another 25bp rate cut.

EMERGING EUROPE, MIDDLE EAST & AFRICA OUTLOOK

  • Inflation Surprises & Rates: Several Eastern European economies posted higher-than-expected CPI readings, often linked to higher food prices. Hungary’s persistent core inflation is prompting a smaller rate cut forecast for 2025.
  • Tariff Indirect Effects: While direct exposure to US tariffs is limited, indirect impacts via the EU and/or China remain plausible for EEMEA.
  • Geopolitical Backdrop: Major focus remains on developments around the Russia-Ukraine conflict and Israel-Hamas tensions.

Specific Updates:

  • South Africa: Inflation seems to have bottomed out; the 2025 budget includes a prospective fiscal anchor and state-owned enterprise (SOE) debt revision.
  • Israel: Inflation at 3.8% y/y in January. Uncertainty around geopolitical risks may affect central bank caution.
  • Senegal: Latest public audit reveals a higher-than-anticipated 2023 debt ratio.
  • Russia: Central Bank held rates at 21% with a moderately hawkish stance.

LATIN AMERICA OUTLOOK

  • Softening End to 2024: Growth mostly slowed across the region by late 2024, though the extent varies by country.

Country Highlights:

  • Brazil: Activity decelerated in Q4 2024, creating downside risks to its 2.1% growth forecast for 2025.
  • Mexico: Q4 2024 GDP fell 0.6% q/q; weaker expansion likely continues into 2025 with forecasts near 1.4%.
  • Colombia: Activity slowed, but expected monetary easing may boost 2025 growth to around 3.1%.
  • Chile & Peru: Chile picked up in late 2024; Peru should see tempered growth in 2025.
  • Argentina: Rebound gaining momentum; growth could reach 4.5% next year.
  • Ecuador: Outlook hinges on election outcomes; economic policy likely to shift accordingly.
  • Central America & the Caribbean: While some deceleration is probable, growth is anticipated to remain solid.

GLOBAL FORECASTS (2025)

  • Global GDP Growth: 2.9%
  • Global Inflation: 2.7%
  • US GDP Growth: 2.3%; Inflation: 2.7%
  • Euro Area GDP Growth: 0.7%; Inflation: 2.5%
  • UK GDP Growth: 1.0%; Inflation: 2.7%
  • Japan GDP Growth: 1.4%; Inflation: 2.8%
  • China GDP Growth: 4.5%; Inflation: 2.3%

WRAP-UP

From Washington’s reciprocal tariff ambitions to Beijing’s property-market headwinds, global economic conditions remain shaped by policy actions, geopolitical risks, and data surprises.

While the US sees firmer inflation measures and weaker consumption in January, Europe and the UK face a mix of soft growth, rising inflation, and diverse central bank outlooks.

Japan remains less targeted by new tariffs, whereas China’s real estate downturn weighs on its 2025 growth trajectory.

In emerging markets, the combination of inflation surprises, monetary policy decisions, and sustained geopolitical uncertainties continues to steer the agenda.

Disclaimer: The blog is a summary generated by AI based on the Barclay Global Economic Report. Please be aware that this is an AI-generated summary and may not be exhaustive or perfectly accurate. Users are advised to independently verify the information and data presented herein with the original Barclay Global Economic Report or other reliable sources before making any decisions based on this summary.

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