Take two: US GDP shrinks more than expected; markets holding up despite uncertainty
- 30 June 2025 (3 min read)
What do you need to know?
The US economy contracted at an annualised rate of -0.5% in the first quarter (Q1) - revised down from the earlier estimate of -0.2%, against 2.4% growth in Q4 2024. This confirms the US endured its first quarterly contraction in three years. The downward revision reflected an adjustment to consumer spending and exports. Separately, a business activity survey showed the pace of growth across the US’s manufacturing and services sectors weakened slightly in June as the impact of tariffs started to be felt. Meanwhile, Federal Reserve Chair Jerome Powell reiterated that policymakers would wait for more clarity about the course of the economy before considering any interest rate cuts.
Around the world
Markets have held up reasonably well - some markedly so - in the first six months of 2025, given the global economic backdrop has been steeped in uncertainty, especially in the wake of disruptive US trade policy and rising geopolitical tensions in the Middle East. Year to date, the MSCI World and S&P 500 indices are up 8% and 5% respectively, as of 26 June. And while MSCI Asia has returned 13%, MSCI Europe has achieved a significant 22% over the period, while the JP Morgan Global Government Bond Index is up 7%.1
Figure in focus: 50.2
Eurozone business activity stalled in June, the latest flash Purchasing Managers’ Index (PMI) showed. The composite PMI, which includes both manufacturing and services data, was unchanged from May at 50.2 – a reading above 50 indicates expansion - continuing its trend of only marginal growth. Manufacturing output continued to expand, albeit at a slower pace of 51.0, down from 51.5 in May, while the services sector stabilised at 50.0 from 49.7 previously. Elsewhere, Japan’s composite PMI expanded at its quickest rate in four months, rising to 51.4 from 50.2 in May.
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Words of wisdom
Ocean Investment Protocol: A new framework for financial institutions, policymakers and industry leaders to help grow the world’s oceans’ economic value in a sustainable way. Launched by the United Nations (UN), the protocol aims to help manage risks and capture opportunities, improving economic growth, livelihoods and jobs while protecting ocean ecosystems. The ocean economy could be worth $5.5trn by 2050, the UN said, and “is becoming increasingly central to global transitions in trade, infrastructure, energy, climate resilience, food security and regenerative tourism”. The UN urged governments and private companies to work together to mobilise funding and unlock investment.
What's coming up?
On Monday, the European Central Bank’s Forum on Central Banking begins in Sintra, Portugal – the event is aimed at addressing macroeconomic shifts and policy responses. The UK publishes final Q1 GDP growth figures the same day while on Tuesday, the Eurozone releases flash inflation figures for June, followed by its latest unemployment data on Wednesday. Several final composite PMIs are issued on Thursday, covering the Eurozone, US, UK, China and Japan, while the US publishes June payroll data.
Disclaimer
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