Our nowcasts for Q3 2025 highlight resilient GDP growth in the Eurozone and France. In Italy and Germany, two economies that suffered a setback in Q2 after a very good Q1, we expect growth to strengthen in Q3 and more markedly in Q4. The UK, meanwhile, is expected to see growth slow in Q3 (after a very strong H1 2025), before rebounding in Q4. In the US, the Atlanta Fed's GDP Now suggests another upside surprise for Q3 growth (1% q/q), before a backlash and a sharp slowdown in Q4. In Japan and China, the slowdown would occur as early as Q3, after a good H1.
The recovery in PMI indices continues despite a decline in industry. In September 2025, the composite PMI reached its highest level since May 2024 (51.2), an improvement attributable to services (51.4). However, the manufacturing index, which had been recovering sharply since the beginning of the year, declined in September (-1.2 points to 49.5). Industrial production rose by 0.3% m/m in July. The economic sentiment index stabilised in Q3.
Rates on new investment loans (irf>5 years) to non-financial corporations in the Eurozone fell very slightly in July 2025 for the second consecutive month. At 3.58%, however, they remained close to their June 2025 level. Rates on new treasury loans (floating rate and irf<3 months) to NFCs fell slightly more sharply to 3.31%. Conversely, rates on new loans to households for house purchase and consumption rose just as modestly (by +1 bp and +6 bp m/m, respectively). They stood at 3.30% and 7.41%, respectively.
The decline in the IFO index in September does not impede the upward trend that began in early 2025. The relative weakness in September particularly affected services and retail trade. However, there has been a clear improvement since the beginning of the year in German industry, construction and wholesale trade. This momentum has not yet spread to the rest of the economy, whilst awaiting the effective implementation of investment plans, with a ramp-up expected in Q4.
In France, the improvement in certain sectors is not spreading to others. The composite business climate has been stable for five months, at 96. Several sectors benefited from an improvement in Q2, including aeronautics, information and communication, and construction (to a lesser extent). These sectors continue to outperform in Q3, but without this spreading to other sectors; they should therefore continue to support growth in Q3. However, growth is vulnerable to a slowdown in these sectors in the absence of other drivers.
In September, the economic sentiment index remained below its long-term average, held back by industry with a production index still in negative territory (-17.4) and production forecasts declining (-0.9). This contrasts with the rise in Italian's industrial production. In services, sentiment is improving (+2.5; +0.2 pts) but activity is struggling to take off. However, expectations for demand in the coming months are rising (6.3, the highest since April 2024; +4.6 pts).
In Spain, business confidence strengthened in September and remains well above its long-term average. In industry, the index remains in contraction territory but is improving (-4.7; +1.1 pts m/m). Production expectations for the coming months have risen significantly since spring (3.2 vs. -0.4 on average in Q2), although they are down compared with last month (-1.1 pts).
The composite PMI has been in expansionary territory for five months. However, it fell to 50.1 in September (-3.4 pts m/m), dragged down by the services PMI (50.8; -3.4 pts m/m), which had reached an 18-month high in August. The manufacturing PMI was weakened in September by the ‘production’ and ‘new export orders’ sub-components. The July decline in industrial production suggests a backlash after a surge in growth linked to expectations of US tariff increases.
The non-manufacturing ISM fell markedly in September to 50.0. This result was due to a decline in business activity and new orders components. Manufacturing ISM improved to 49.1 in September, driven by output growth (51.0). However, new orders contracted (48.9), particularly those for export (43.0). The rise in prices paid slowed for the third consecutive month (61.9).
The Tankan survey reported an improvement in large Japonese manufacturing companies' sentiment (14) in Q3, including in the motor vehicles sector (10). The overall figure (all enterprises and all industries) remained stable (10). The Services PMI remained stable at a high level (53) in September, while the Manufacturing PMI (48.4) fell to a five-month low due to the first contraction in hiring (49.4) since November 2024 and a decline in output (47.3, -2.5 pp).
In the Chinese manufacturing sector, the official PMI has remained in contraction territory since April, but it improved to 49.8 in September. The PMI published by RatingDog (formerly Caixin) also improved (to 51.2 from 50.5 in August and 49.5 in July). This slight recovery is notably due to the “new export orders” sub-component, which reached 47.8 in the official index – a level that, while still in contraction territory, is at its highest since March. The export sector continues to withstand the rise in US tariffs.
