Week Ahead Economic Preview: Week of 21 July 2025

The following is an extract from S&P Global Market Intelligence’s latest Week Ahead Economic Preview. For the full report, please click on the ‘Download Full Report’ link.

The release of flash PMI data for the world’s largest developed economies will provide an updated assessment of the economic environment in a month of ongoing heightened uncertainty surrounding US tariff policy. The European Central Bank also meets to set monetary policy.

We look to the flash PMI survey data for July, published 24th July, to provide an updated assessment of the economic growth trajectories for the US, Eurozone, Japan and the UK. Back in June, the US had reported the fastest output growth of the major economies, but its rate of expansion remained slow compared to the end of last year. While growth lifted higher in the UK and Japan, it remained somewhat sluggish in both cases alongside a near-stalled eurozone. The latter’s expansion nonetheless edged up to a three-month high in part due to Germany’s manufacturing sector enjoying its best spell for three years.

The PMIs also brought indications that these modest performances may worsen. Warning signs included a likely upcoming inventory adjustment after US stockpiles rose sharply as firms front-ran tariffs, low consumer demand, deteriorating business confidence amid persistent geopolitical uncertainty, and disappointing signals on capex.

However, July has so far seen some calming of tensions in the Middle East as well as a further postponement of tariff hikes from the US. The US has now given trading partners until 1st August for new deals to be made. This new deadline is seen by many as a preference for the US to strike deals instead of imposing the higher rate tariffs, and has lifted financial markets. Although the geopolitical landscape clearly remains fluid, especially in relation to tariff policies, this lift to financial markets provides an important ray of hope to watch in the flash PMIs, whereby improving financial conditions could feed through to stronger global services growth, helping offset some of the tariff-related headwinds.

The flash PMIs will be especially closely watched in the eurozone, as the ECB announces its policy decision on the same day. A rate cut is not anticipated but markets will be eager to see the door being left open for a rate cut in September. Although inflation in the eurozone is running at the ECB’s 2% target, and policymakers are concerned about the fragility of growth, the ECB’s Deposit Rate has already been trimmed to what is considered to be a broadly “neutral” level of 2%, setting a high bar for further policy easing.

Flash PMIs are updated after tentative uplifts were seen in the UK, Japan and eurozone in June, albeit still underperforming the US.

The ECB is leaning toward another cut to interest rates amid weak growth and uncertainty over inflation, but is likely to wait until September before making a move.