Global Economic Update – June 4, 2025

Introduction

In mid-2025, the global economy is confronting considerable volatility, compounded by geopolitical tensions, trade barriers, inflationary pressures, and policy adjustments from significant economies. The Organization for Economic Cooperation and Development (OECD) reduced its estimate for global GDP growth to 2.9% due to questions surrounding U.S. trade policies, weakening demand in China, and geopolitical events in Europe and the Middle East. This post will highlight the economic transitions reported as of June 4, 2025.

OECD Warns of Slowing Global Growth

The new OECD report notes that the world economy is experiencing dismal development in output, declining levels of consumer confidence, and the level of industrial output up is falling. The advanced economies (the United States, Germany, and Japan) all experienced growth lower than predicted, while emerging markets are facing economic volatility including currency depreciation and capital flights.

Noteworthy points:

• Global GDP growth expected at 2.9% in 2025 down from 3.3% in 2024
• U.S. growth reduced to 1.6% down from 2.8% last year in 2024
• Eurozone growth slowed to 1.0% last year with Germany on the brink of recession
• China’s recovery is stalling with growth about to be 4.8% vs 5.5% last year

United States: Trade War and Inflation Concerns

The Biden administration’s recently announced adjustments are trade tariffs and a 50% tariff on imports of steel and aluminum from selected countries. Economic uncertainty prevails as manufacturers go up against tariff barriers intended to protect domestic industries, forcing adjustment bids and creating possibilities for retaliatory tariffs.

Domestic Impacts:

• Manufacturing costs are rising. We are particularly seeing this in construction and automotive.
• Inflation is sticky at 4.1 perception. Partly a result of commodity pricing and housing.
• The fed interest rate is still high at 5.25 to reduce investment and credit.

 

Europe: Diverging Recovery

Although France and Spain and several other EU countries were showing modest stability, the German economy is stagnating and experiencing weak export demand. Energy prices stabilized, but consumer spending remains timid.

Notable Trends:

• Germany’s manufacturing production down 2.1% in Q1
• Eurozone unemployment unchanged 6.5%
• ECB expected to hold rates through the third quarter, escalating inflation uncertainties.

 

Asia: Mixed Signals from China, Japan, and South Korea

China:

• Exports dropped again in May, down 3.2% YoY, primarily driven by weak global demand
• The real estate market, feeling the pinch, has softened and is impacting investment domestically

Japan:

• A small 1.2% growth, primarily imports driven from tourism and tech exports
  After being weak, the yen is also catching up,
• weaker yen will boost the export economy, but it will also kept up increased import costs to leverage exports

South Korea:

• New president, Lee Jae-myung, also took office with stimulus focused on investments for SMEs and providing support with digital innovations
• The KOSPI is up 4.3% since April and there is optimism in regards to the tech sector

Investor Attitudes and Global Stock Markets

Global equity markets have recovered from the macroeconomic headwinds that have loomed in previous weeks (such as central bank tightening) with primarily technology optimism and strong corporate earnings in certain areas.

• MSCI World Index is trading at the all-time high (as of Feb/24)
• US Nasdaq Composite index has increased by 6.5% for the second quarter ending May 2023
• European STOXX 600 Index is also up 3.8% as of year to date.

Outside of earnings and recessionary potential, investor appetite is directed towards companies involved in AI, Green energy and infrastructure projects while many continue to have caution about cyclical sectors, such as retail and real estate.

Commodities and Energy Markets

World oil prices have fluctuated due to OPEC+ supply cuts and sanctions on Russian energy exports. Brent crude is valued at approximately $87 per barrel. Prices for agricultural commodities are volatile as a result of disrupted Ukrainian exports and climate issues.

• Wheat and corn prices are up 15% since January.
• Demand for natural gas is rising in Asia and Europe.

Interest Rate Shifts Could Reshape Monetary Policy

As parts of the world show signs of softening inflation, central banks are coming under further scrutiny in pivoting away from hawkish monetary policy. The Federal Reserve (Fed), holding interest rates at 5.25% since late 2024, has indicated a willingness to cut rates in Q3 if inflation continues to fall. The European Central Bank (ECB) may retreat from high rates should Eurozone inflation remain under 3%. In Asia, the Bank of Japan and the central bank of South Korea are watching wage growth and commodity prices to see what kind of adjustments it affords them. The easing of interest rates could lead to more borrowing by consumers and greater spending, particularly in:

a. housing,
b. automotive, and
c. technology.

However, resistance could reignite inflation if energy prices were to rise. The global bond market has essentially communicated a slight dovish pivot that was already priced in through softening yields. For investors and businesses, the second half of 2025 comes at a critical period when clarifying monetary signals must be established and acted upon.

Energy and Food Security Remain Pressing Concerns

Energy and agricultural global supply chains continue to be vulnerable because of geopolitical uncertainty and turmoil, sanctions, and climate impacts. Oil prices have calmed down from highs in 2022 but the market still reflects OPEC+ supply cuts and the ongoing impact of the Russia-Ukraine conflict. Demand for natural gas in Europe and Asia is increasing, as countries look for alternatives to Russian pipeline in favor of LNG, requiring infrastructure expansion. Food security is stressed due to outbreaks of export controls from key suppliers, poor harvests from previous weather and crop conditions, and high transport costs. In particular, Africa and the Middle East face higher vulnerability to price shocks or supply interruptions. The UN Food and Agriculture Organization (FAO) has warned that a humanitarian crisis could occur with the blockade of grain exports from Ukraine. Policymakers have prioritized strategic reserves, green energy transitions, and bilateral supply agreements to maintain supplemental treaties. In H2 2025, food and energy policy will determine how price signalling will be stabilized and how import reliant countries will mitigate political unrest.

Global Trade Relations Will Shape Economic Momentum

Energy and agricultural global supply chains remain fragile because of the growing geopolitical instability, escalating sanctions, and climate disruptions. Oil prices have peaked but have been trending lower, but the market is still often volatile due to OPEC+ supply constraints and the Russia-Ukraine conflict, as well as natural gas demand increases in Europe and Asia as countries seek alternatives to Russian pipelines, which have prompted infrastructure buildout for LNG. Food security is under particular pressure, with wheat, corn, and rice exports facing challenges due to export restrictions, subsequent poor harvests, and high transportation costs. Africa and the Middle East are particularly vulnerable to price shocks. The United Nations Food and Agriculture Organization (FAO) is raising an alarm about a possible humanitarian crisis, should grain exports from Ukraine continue to be halted. Currently, policymakers are focused on strategic reserves, transitioning to green energy, and engaging in bilateral trade agreements in 2024 and beyond, which all factor in maintaining or replacing continuity of supply. Energy and food policy will be extremely relevant in H2 2025, especially in avoiding price shocks and mitigating potential unrest of import-reliant countries.

Outlook: What to Expect in H2 2025

• Central banks may ease interest rates if inflation trends downward
• Energy and food security will remain top priorities
• Trade negotiations between the U.S. and its partners will shape Q3 outlook
• Digital innovation, AI, and ESG investing will attract sustained capital

Conclusion

The global economy in June 2025 is complicated and changing. Economic growth is slowing, although the resilience of financial markets and technological replacement provides hope. The balance for policy makers is between managing inflation and re-establishing demand, and moving towards employment. Simply put, not surprisingly investors and analysts will need to be flexible and consider sectors.