In January, inflation fell in the United States, the Eurozone, the United Kingdom and Japan. The United Kingdom still has the highest inflation rate, ahead of the United States. The Eurozone followed, with Japan recording the lowest inflation rate. Core and wage trends are moderating overall, with this trend reinforced by the anchoring of inflation expectations.
With the rise of artificial intelligence (AI), emerging countries with strategic resources—such as critical metals and semiconductor production capacities—are becoming key players. Countries that are well positioned within AI supply chains benefit from both an economic growth engine and an asset to leverage in their international relations. Industrialised countries in Asia, which account for over 85% of the global export of electronic chips, are best placed to capitalise on the increasing demand for AI. However, this advantage comes with greater exposure to the risk of a technology market correction
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When Donald Trump ran and won in 2024 on a campaign to “make America Great Again” by building a tariff wall around the US, very few voices rose to defend free trade, outside of international organisations whose creed it is to defend it. After “Liberation Day”, economic forecasters braced themselves for a global trade war. But nothing of the sort happened. Instead, 2025 ended up being an all-time record year for trade liberalisation measures. 2026 is not even two-month-old and has already seen several giga-trade deals signed, two of which by India, one of the countries with the highest tariffs in the world, and there are more signs that the tide is turning
Optimism surrounding the deployment of artificial intelligence (AI) has become a key driver of economic growth in the United States. But this is not without its drawbacks: the energy-intensive nature of AI is putting pressure on the electricity markets and pushing prices higher – a trend that is set to continue in 2026. This poses a challenge not only for the competitiveness of American businesses but also, due to the resulting inflationary pressures, for households. It also creates a political problem for the Trump administration as the midterm elections draw near, where the issue of affordability will take centre stage
Kevin Warsh is set to succeed Jerome Powell as Federal Reserve Chair in May 2026, pending Senate confirmation. President Donald Trump has picked a figure whose public and private track record is likely to reassure the financial markets. While Warsh has advocated lower rates and a reduction in the central bank's balance sheet, he will probably be constrained in his plans. Therefore, we do not expect any material shift in monetary policy in the short term.
Europe is getting better and better. It has not been spared shocks, notably the war in Ukraine – its impact on energy prices is largely responsible for German stagnation – and political uncertainty in France, which affected French GDP growth in 2025. But Europe is overcoming these difficulties. GDP Growth in the Eurozone proved robust, at 1.5%, and 2026 should be a positive year, even more than in 2025. Industry has emerged from recession, buoyed by defence, aeronautics and AI, while households are showing purchasing intentions not seen since February 2022. All these factors will help Europe to continue building its strategic autonomy. The context is favourable and Europe is becoming increasingly credible in the eyes of investors.
Business climate, households confidence, labour market, inflation in Q4 2025: our quarterly Pulse of the economic conjoncture
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Our nowcast highlights an acceleration in growth in the Eurozone in Q4 (+0.4% q/q). And the Atlanta Fed's GDP Now shows continued strong growth in the US.
Growth is expected to have accelerated or at least remain steady across all regions in Q4. This is reflected in our nowcast for the Eurozone (+0.4% q/q) and the Atlanta Fed's GDPNow (+1.3%q/q). In France, after a very good figure in Q3, our nowcast suggests another strong performance (+0.3% q/q), as does our forecast for Spain (+0.7%). Our forecasts point to improving growth figures in the United Kingdom (0.2%), Italy (0.2%) and Japan (0.3%); the same goes for the figure published in China (+1.2% q/q).
In the Eurozone, the improvement in the business climate points to stronger activity. Household confidence remains moderate but spending intentions are rebounding. The unemployment rate is close to its low point, and inflation remains under control.
Lending rates are relative stable since September. Bank financing flows to Eurozone corporations are expanding faster than market financing flows. In France, outstanding loans continue to recover overall.
The industrial recession ended in Q4 2025 in Germany. Production rebounded, driven by capital goods, as did demand (new industrial orders). However, the business climate remains mixed.
The business climate initially improved in industry (driven by the rebound in aeronautics production) and is now improving in services as well, particularly business services. Household confidence continues to improve, albeit moderately. The labour market remains resilient.
Despite the slowdown in December 2025, the business climate remains favourable. Household confidence remained stable over the last two months of the year. The unemployment rate reached a historic low. At the same time, the number of people in employment remains at its highest level.
The business climate is strengthening and high consumer confidence is supporting private consumption. The labour market remains dynamic. Wage growth (negotiated hourly) continues (+3.5% y/y in Q4; stable compared to Q3) and remains above inflation, leading to an increase in households’ purchasing power.
