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.
According to our forecasts, growth in Japan, France and Germany will, at best, be unchanged in Q2 compared with Q1. It will slow in Spain, Italy and, above all, the United Kingdom. China will feel the growing impact of the trade war on its growth.
Business climate: mixed picture
April was marked by mixed situations in the Eurozone (significant deterioration in Italy, resilience in Germany, France somewhere in between). The deterioration is more or less widespread in the UK, China and the US.
Household confidence: gloomy
Based on April data, the negative sentiment prevailed in the Eurozone, despite a rebound in Germany. The stability of the INSEE survey in France illustrates this gloom. The deterioration is clear in Italy, the United Kingdom, the United States, and Japan. Consumption growth remains significant in China.
Labor market: still in a favorable situation
Job creation continues in the United States and the unemployment rate is stable at a very low level in the Eurozone. A reversal appears to be underway in the United Kingdom (job losses). In Japan, real wages continued to contract.
Inflation: observed inflation down, expectations up
In March and April, disinflation strengthened in the Eurozone (particularly in France and Germany), the United States and the United Kingdom. However, inflation expectations rebounded in all three regions, especially in the United States. Inflation remains relatively high in Japan, and moderate deflation continues in China.
Monetary policy: between easing and status quo
The ECB is expected to cut its key rate by 25 basis points in June and July (after doing so in April), and the BoE by 25 basis points per quarter in 2025. China is also expected to ease its key rate by 10 basis points per quarter from Q2 to Q4. In the US and Japan, the key rate is expected to remain unchanged in 2025.
Article completed on 2 May 2025
