Eco Pulse

Ecopulse | July 2025

07/08/2025
PDF

Our Q2 2025 nowcasts, which measure trend growth (excluding exceptional effects), highlight the resilience of the Eurozone (+0.3% q/q) and, to a lesser extent, France (+0.2% q/q). Weaker exports (after their surge in Q1 in anticipation of the US trade tariffs) penalises our forecast in Q2 (-0.1% in the Eurozone).

It’s the opposite for the US (-0.1% q/q in Q1) with the Atlanta Fed nowcast at +0.7% for Q2 (imports down compared to Q1). With an average of 0.25% in H1 however, US growth is estimated to have slowed down (compared to 0.6% per quarter in 2024); that of the Eurozone (0.25% on average in H1, compared to 0.35% on average in H2 2024) is expected to be more stable. Our Q2 growth expectations for Eurozone members, the UK and China also point to a slowdown.

Japan is not expected to emerge from the stagnation observed in Q1.

Economic indicators for Q3 2025

Business climate: better in Europe

The June surveys show an improvement in almost all countries, including those where the trend has been more unfavourable so far (the United States, Japan, China). In France, however, this improvement is not widespread (in construction only).

Household confidence: stabilisation after an upturn. Surveys showed an improvement in May

This is not called into question in June where a relative stabilisation is observed. In the US, uncertainty remains high as surveys deliver different messages on household sentiment and the extent of the slowdown in their consumption.

Labour market: positive signs prevail

The situation remains favourable in the Eurozone countries and the US, and the employment rate continues to rise in Japan. More negative signals are appearing in the United Kingdom (job destruction) and in China (reduction in the number of hours worked).

Inflation: are the good surprises behind us?

Inflation has reached the ECB's target in the euro area and is not yet impacted by tariffs in the US. However, inflation expectations remain high in the US. In Japan, inflationary pressures are increasing. Inflation is stabilising at a significant level in the UK. China remains in deflation.

Monetary policies: towards a rotation?

The ECB is expected to cut its key interest rate by 25 bps one last time in September. Speculation about when the Fed might take over persists. The FOMC is divided, but we still believe the Fed will only ease policy in 2026. In Japan, the central bank announced that it will slow down its pace of the reduction of its JGBs purchases. In the UK and China, gradual monetary easing is expected to continue (25 and 10 bps per quarter, respectively).

Credit in the Eurozone: towards a rotation (bis)?

Bank financing to Eurozone companies is slowing down as cash loans are slowing, while the increase in investment loans is continuing. Meanwhile market-based financing is on the rise. However, the recent drop in bank loan rates could lead to an increase in demand for these loans. Finally, bank financing to households is accelerating from sluggish levels.

Article completed on July 4, 2025

THE ECONOMISTS WHO PARTICIPATED IN THIS ARTICLE

Other articles from the same publication

Eurozone
Eurozone: Indicators stable, inflation under control

Eurozone: Indicators stable, inflation under control

The composite PMI index was stable at 50.2 in June, remaining above the expansion threshold in the first half of the year. The upturn in the manufacturing index slowed but continued (+0.1 pt to 49.5) [...]

Read the article
Eurozone
Credit in the Eurozone: Slowdown in corporate lending, acceleration in household lending

Credit in the Eurozone: Slowdown in corporate lending, acceleration in household lending

The decline in borrowing rates in the Eurozone resumed, except for investment loans. New investment loan rates (IRF > 5 years) to non-financial corporations in the eurozone remained stable in May 2025, at 3.67%, for the third consecutive month [...]

Read the article
Germany
Germany: economic recovery continues

Germany: economic recovery continues

The IFO business climate continues to improve (+0.9 points in June compared to the previous month, to 88.4), supported by favourable economic prospects [...]

Read the article
France
France: Decline in private sector confidence

France: Decline in private sector confidence

Business climate: improvement confirmed in construction. The business climate continues to be quite low, with 96 in June and in May (97 in March-April) [...]

Read the article
Italy
Italy: Business climate on the rise, household confidence down

Italy: Business climate on the rise, household confidence down

Business climate: the improvement continues. The economic sentiment index has been improving for two months, reaching 98.6 in June (+0.2 points m/m) [...]

Read the article
Spain
Spain: Economic momentum remains strong

Spain: Economic momentum remains strong

Business climate: favourable, but slightly weaker. In June, the economic sentiment index remained above its long-term average and that of the Eurozone, but weakened for the second consecutive month (102; -1.4 points m/m) [...]

Read the article
United Kingdom
United Kingdom: Surveys show improvement, but employment stalls

United Kingdom: Surveys show improvement, but employment stalls

Business sentiment improves in all sectors: The composite PMI index rises in June (+1.7 points, to 52), driven by both services (+1.9 points, to 52.8) and industry (+1.3 points, to 47.7) [...]

Read the article
United States
United States: Improvement in the Business Climate

United States: Improvement in the Business Climate

Improvement in the ISM. The manufacturing ISM improved modestly (49.0, +0.5 pp) in June, with a notable jump in output (50.3, +4.9 pp), which entered expansion territory for the first time since February [...]

Read the article
Japan
Japan: Improvement in the Business Climate

Japan: Improvement in the Business Climate

Favourable developments for the business climate. The manufacturing PMI stood at 50.1 in June (+0.7 pp, the first expansion posted since May 2024) thanks to growth in output (51.2, +2.5 pp). The services sector also improved (51.7, +0.7 pp) [...]

Read the article
China
China: Moderate slowdown in exports and fiscal support

China: Moderate slowdown in exports and fiscal support

Trade truce. The official PMI for the manufacturing sector has been in contraction territory since April, mainly due to the US-China trade war and worsening export prospects. However, the index rose slightly from 49 to 49.5 in May and 49 [...]

Read the article