In this new Podcast, we take a look at the short- to medium-term economic outlook for the major advanced economies, analysing the impact of trade tensions, the room for manoeuvre available and the expected economic dynamics.
The updated economic scenario and forecasts of the Economic research
France's fiscal deficit worsened in 2023 and 2024. Spending growth was maintained, despite the slowdown in public revenues growth. The 2025 budget should enable consolidation to begin thanks to a rebound in revenues. However, spending as a share of GDP is expected to remain relatively stable. The challenge of continuing fiscal consolidation in 2026 therefore remains intact. This exercise will be constrained by the expected increase in interest payments and military spending.
The latest economic news.
Equity indices, Currencies & commodities, and Bond markets.
Key figures for the French economy compared with those of the main European countries, analysis of data on the population and the French labour market, activity by sector, publication administration figures, inflation, credit and interest rates, corporate and household accounts.
Central European economies have defied pessimist predictions in recent years on their ability to cope with shocks. The region posted a less pronounced GDP contraction in 2020 compared to advanced EU countries. In 2022, at the onset of the Russia-Ukraine war, the region was viewed as the most exposed within Europe due its high energy dependence on Russia. However, the widely expected recession did not occur as these economies implemented generous fiscal stimulus. Central European countries are now facing the tariff shock imposed by the US administration. Will this time be different?
Since January 2025, the United States has announced major reversals in its foreign and trade policies. For developing countries that depend on international aid, the suspension of USAID and the increase in tariffs on US imports create a double shock that will durably weaken their economic prospects.
Our nowcasts for Q2 point to moderate growth in the Eurozone (+0.2% q/q) and France (+0.1% q/q). The Atlanta Fed's GDPNow suggests a rebound in US growth (+0.3% q/q) after the slight contraction in Q1.
The business climate is holding up. The composite PMI decreased (50.1) but remains in expansion area. The manufacturing index persists in negative territory but is getting better for the fourth month in a row. Expectations of activity in services fell sharply (53.1, the lowest level in five years).
The business climate remains fragile. The IFO index has been rising since the beginning of 2025, including in April (86.9, +0.2 pp m/m, historical average of 95.7). However, the economic outlook has darkened as a result of the trade tensions triggered by the protectionist shift in the United States. These tensions have now spread to the services sector (flash PMI down to 48.8 in April). Industry is showing signs of stabilisation, but the situation remains fragile.
Mixed business climate. A slight deterioration was noticeable in April (from 97 to 96), due to a decline in retail sales and a deterioration in construction activity to a new low. The manufacturing index benefited from a rebound in production, particularly in the aeronautics industry. Despite a slight improvement, the services index remains below its long-term average.
Business sentiment deteriorated sharply in April. Confidence in the services sector is at its lowest since October 2022, causing the economic sentiment index to plunge. Confidence in industry continues to deteriorate (-0.6pt m/m), also due to a decline in order-book levels.
Business sentiment remains buoyant. The European Commission's economic sentiment index has been rising for three months (103.8; +0.4 points m/m), driven by an improvement in industry (-4.2; +1.3 pt). Indices of production expectations for the months ahead and of stocks of finished products are improving.
Business climate is deteriorating: the services PMI (48.9) catch up the industrial PMI (45.4) in contraction territory in April, as does the composite PMI (48.2). The index of new export orders in the manufacturing sector (not taken into account in the calculation of the manufacturing PMI) plunges and approaches the lows reached during Covid.
A Downbeat Business Climate. The ISM Manufacturing index has declined for 4 consecutive months, and reached 48.6 in April (-0.2pp). Production, employment and new orders were all in contraction territory. The price-paid index (69.8) stood at its highest since 2022. Meanwhile, the ISM Non-Manufacturing index remained positive but slowed (50.8 in March vs. 54.1 in December 2024).
Services Driving Business Climate Up. Growth in activity resumed in April according to the Composite PMI (51.1, +2.2pp), supported by the Services PMI (52.2, +2.2pp). By contrast, the Manufacturing PMI remained in contraction territory (48.5, +0.1pp), penalized by the largest deterioration in new orders since February 2024.
Widespread deterioration. The official PMI for the manufacturing sector fell to 49 in April (from 50.5 in March) and the Caixin PMI fell to 50.4 (from 51.2 in March). The decline is widespread across all sub-components and heralds a significant slowdown in activity after the rebound in March. These are the immediate consequences of the new 145% tariffs imposed by the US on Chinese imports.
The vast majority of Latin American countries have been subject to 10% tariffs, the minimum rate, since April 2, imposed by the Trump administration. This leniency is due to the composition of their exports (raw materials and energy, whereas the Trump administration's “reciprocal” tariffs mainly targeted exporters of manufactured goods) and the fact that most of them have a trade deficit with the US.
Every Spring and Fall, economic and financial policymakers from the whole world gather in Washington DC for the IMF/WB Meetings. Thousands of private financial sector professionals tag along. All over town, in both formal and informal settings, participants share and compare with their peers their own assessments of the world’s economic prospects. In my 25 years of taking part in these Meetings, this was one of the most interesting ones, with a pervasive sense among participants of living through a pivotal moment of economic history. In what follows, I offer a distillation of what this global pulse-check revealed.
