RESEARCH — Sept. 17, 2025
Global Economic Outlook: September 2025
By Ken Wattret
What are our GDP growth forecasts for 2025 and beyond?
Our annual global real GDP growth projections for 2025-27 are broadly unchanged in September’s update, but this masks divergent national revisions.
We have revised up our annual real GDP growth forecasts for 2025 in several major economies, including the US, Japan, UK, Brazil and India. This partly reflects the latest GDP figures for the second quarter, along with some national idiosyncrasies. For similar reasons, 2025’s annual growth forecasts have been lowered in some other major economies, including Canada, Germany and Russia.
At global level and in most major economies, we continue to forecast a weaker second half of the year than the first, growth-wise, reflecting various headwinds including the unwinding of the prior boost from tariff frontrunning and still elevated uncertainty. S&P Global’s recent Purchasing Managers Indexes (PMIs®) suggest, however, that economic activity may be more resilient than forecast in the near-term.
What does the latest inflation data indicate?
Recent inflation data have shown some signs of stickiness. According to our latest monthly figures, the global consumer price inflation rate has been going sideways at a little over 3% since February, while the core rate for the G5 group of economies has been picking up in recent months.
The core goods inflation rate for the G5 continued its upward trend in July. It is now two percentage points above its trough in mid-2024, with the rise in the US core goods rate particularly pronounced in recent months. The gradual decline in services inflation in the G5 also seems to have stalled, with the US again a key contributory factor.
We continue to forecast that the lagged effects of widespread monetary policy easing will support growth in most major economies and regions into 2026, but sticky inflation is a potential spanner in the works. While our latest round of inflation forecasts generally shows lower headline rates in 2026 compared to 2025, this partly reflects the expected sharp drop in crude oil prices from later this year.
What is likely to happen with monetary policy in 2025 and 2026?
US rate cuts have resumed, although we still expect the Fed to adopt a cautious approach. Weaker recent employment data and back revisions paved the way for a cut of 25 basis points to a range of 4.00-4.25% at the Sept. 17 FOMC meeting.
While we continue to see this as the first of a series of cuts, markets are currently discounting a rather rapid pace of easing. At the time of writing, rate cuts of 25 basis points are almost fully priced in for each of the remaining three policy meetings this year, with a decline below our estimated neutral Fed funds range of 3.00-3.25% discounted by summer 2026.
Given lingering worries about a renewed pick-up in US inflation, our base case is for 25 basis point cuts only at every other policy meeting beyond this month, with the estimated neutral range to be reached late in 2026.
What does our Purchasing Managers Index data tell us?
S&P Global’s Purchasing Managers Indexes (PMIs®) for August showed further signs of improvement at global level, albeit with some caveats.
The global composite output index improved for the fourth month in a row in August, to reach its highest level since mid-2024, while there were some positive signs for the struggling manufacturing sector. The global manufacturing output and new orders sub-indexes rose back above the expansion level of 50, although both were not far above the growth threshold.
The global index for new export orders, a bellwether for global trade growth, remained below 50 where it has been since November 2024’s US elections. The surveys of expected output were also disappointing, some of the weakest since the COVID-19 shock.
While there is relief that a negative spiral of escalating trade tensions and financial market turmoil has not materialized, businesses’ confidence in future demand prospects remains weak.
Where do we see signs of fiscal fragility?
Sovereign debt markets in parts of Europe continue to show signs of vulnerability.
French 10-year yield spreads to Germany are now at similar—and in some cases, higher—levels than those in southern Europe. Continued uncertainty around government stability and the passage of the 2026 budget are combining with worries about the high public sector deficit—the eurozone’s largest in 2025 at well over 5% of GDP—and the high public sector debt ratio—the third highest after Greece and Italy.
The UK’s fiscal and political challenges, meanwhile, have contributed to the highest 30-year Gild yields since the late 1990s, albeit with demand at recent auctions remaining robust.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.