Weekly Economic Outlook: June 2-8, 2025

The first week of June brings a broad set of economic indicators that reflect a world economy continuing to grow, though with signs of moderation and mixed momentum across regions. While inflation pressures are easing in several major economies, growth is showing early signs of softening, prompting cautious responses from central banks.

India: Interest Rate

India: Strong Activity with a Surprising Rate Cut

In India, economic activity remains solid. Both manufacturing and services PMI readings stayed well above the growth threshold, supported by strong domestic demand and an increase in employment. However, the pace of expansion slowed slightly, and inflationary pressures, especially in input and output prices, have risen. In response, the Reserve Bank of India surprised markets with a 50 basis point rate cut, suggesting a shift toward supporting growth as price stability appears more manageable for now.

The U.S. data paints a more mixed picture. Manufacturing activity contracted further, pointing to continued stress in the sector. However, job openings increased in several industries, and the overall unemployment rate remained steady at 4.2%. That said, declining labour force participation and a sharp drop in employment raise concerns about underlying labour market strength.

China: Unexpected Contraction Dampens Recovery Hopes

In China, manufacturing saw an unexpected contraction after months of modest recovery. Falling output and weak new orders reflect challenges both at home and abroad. Still, improved business sentiment suggests firms are hopeful for better conditions ahead. Meanwhile, falling input costs are providing some relief on the price front.

EU: Interest Rate

Eurozone: Inflation Falls Below Target, ECB Responds with Rate Cut

In Europe, the headline inflation rate fell below the European Central Bank’s 2% target for the first time in months, reinforcing the ECB’s decision to cut rates by 25 basis points. This policy shift comes at a time when growth remains subdued but stable. The outlook is cautious, with policymakers emphasising the need to monitor external risks, including trade tensions and slowing global demand.

Canada’s economic landscape is becoming more uncertain. While the Bank of Canada held interest rates steady, a rise in unemployment and weakness in manufacturing employment point to growing sensitivity to external trade developments.

Overall, last week’s data suggests the global economy is still expanding but at a more measured pace. Central banks are beginning to adjust their policies with greater flexibility, balancing growth priorities with inflation control. The outlook remains broadly stable, though shaped by evolving geopolitical and trade dynamics.