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PLACEMENT BOOSTER - MACRO ECONOMIC TRENDS

  • July 17, 2025
  • MACRO ECONOMIC TRENDS

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Global Trends

Global Economic Growth and Activity

 

  • The US economy shows resilience despite uneven hiring: Employers added 147,000 jobs in June, surpassing expectations, though private payrolls grew cautiously
  • The US labour market remains tight: Unemployment dropped to 4.1% in June, and job openings hit 7.8 million in May, signalling robust demand
  • Global manufacturing faces slowdown: Manufacturing activity contracted in key regions, with Asia’s export-reliant economies like Taiwan and Vietnam reporting weak demand, impacting global supply chains.
  • Mixed signals in US services and consumer spending: While services PMI rose to 50.8 in June, indicating expansion, consumer spending fell 0.5% in May, reflecting caution amid policy uncertainty.
  • Euro-area growth stagnates: Business activity PMI fell to 50.1 in June, showing near-stagnation due to manufacturing weakness and trade uncertainties.
  • UK economy sees temporary boost: GDP grew 0.7% in Q1, the strongest in a year, but recent data, like weak retail sales, suggest a gloomier outlook.
  • China’s economy shows weakness: Industrial profits fell 9.1% year-over-year in May, and the manufacturing PMI at 49.7 in June indicates ongoing contraction.
  • Japan’s business sentiment improves slightly: The Tankan survey reported cautious optimism among large manufacturers.

Global Trends

Inflation and Monetary Policy

  • Euro-area inflation stabilizes at target: Inflation hit 2% in June, but ECB remains cautious about rate cuts, requiring more time to confirm a sustainable decline.
  • Rising inflationary pressures in key economies: UK grocery prices surged, potentially delaying BoE rate cuts.
  • US Fed adopts wait-and-see approach: No immediate rate cuts planned, awaiting data on tariff-driven inflation.
  • Japan’s annual wage negotiations led to a 5.25% pay increase, the highest in 34 years, boosting household income and supporting the BoJ’s view of a sustained wages-prices cycle..
  • US wage growth steady: Hourly earnings rose 0.2% in June, with annual growth at 3.9%, adding to inflation pressures.
  • Emerging markets ease cautiously: Countries like Mexico, Poland are cutting rates to support growth amid trade and inflation pressures.

Inflation and Monetary Policy

Fiscal Policy and Debt

  • Trump’s One Big Beautiful Bill Act (OBBBA) was signed into law, projected to add $2 trillion to US debt over 10 years
  • NATO members committed to a 5% GDP defence spending goal by 2035, potentially increasing spending by $371 billion.
  • Global public debt has risen sharply, with servicing costs in some nations exceeding spending on education and defence.
  • US fiscal expansion via OBBBA could limit emerging markets’ access to credit and complicate inflation control.

Fiscal Policy and Debt

Global Trends

Trade and Geopolitics

  • The US and China finalised a trade deal, maintaining tariffs at an average of 40% on Chinese goods.
  • Rising protectionism threatens global trade: Trump’s proposed tariffs on BRICS (an additional 10% ) and EU goods signal increasing barriers.
  • BRICS pushes back on protectionism: Leaders warned of trade disruptions and economic disparities.
  • US-EU trade talks falter: No deal by July 9 risks 50% tariffs on $1.98 trillion in annual trade.
  • China expands trade with the Middle East. Optimism persists for the regions despite geopolitical risks like rising tensions between Iran and Israel threatening trade routes through the Strait of Hormuz, a key oil chokepoint.
  • Trump proposed 25% tariffs on Japanese autos if trade negotiations fail by year-end
  • Global trade faces historic challenges: Tariffs at decades-high levels increase costs and inflation risks.
  • US effective tariff rates may settle at 10% broadly, with higher rates for China (40%), Canada (15%), and Mexico (20%).

Global Trends

Financial Markets

  • US markets show optimism: S&P 500 gained 1.8% and Nasdaq rose 2.1% in the week ending June 28, both hitting all-time highs. Dow Jones Industrial Average climbed 2.30% in a holiday-shortened week, buoyed by strong earnings
  • US high-yield bond prices rose 0.7% in June, supported by equity market gains.
  • Japan’s Nikkei 225 dropped 0.91% over the week, reflecting yen strength and export concerns.
  • China’s CSI 300 index advanced 1.18% in the week, driven by policy support expectations.
  • Eurozone’s STOXX Europe 600 Index remained nearly unchanged, up just 0.1% for the week

Sectoral Developments

Housing
  • Global housing markets face challenges: the US and the UK markets see declining sales and prices due to affordability and rate pressures.
  • AI advancements in personalised medicine focus on biomarker-based treatments, potentially cutting diagnosis times.
  • AI infrastructure investments are forecast to reach $1 trillion by 2030, led by data center expansions.

Indian Trends

Fiscal and Tax Trends

  • Gross GST collections hit a record ₹22.08 lakh crore in FY25, registering a YoY growth of 9.4%. This is nearly double the FY21 figure of ₹11.37 lakh crore, reflecting strong tax buoyancy and formalisation efforts.
  • The average monthly GST collection rose to ₹1.84 lakh crore in FY25, up from ₹1.68 lakh crore in FY24. The number of registered taxpayers under GST has surged from 65 lakh in 2017 to over 1.51 crore in 2025.

Inflation Outlook

  • CPI inflation eased to 2.82% in May, its lowest since February 2019, largely due to a sharp drop in food prices. Forecasts for June 2025 indicate further moderation to ~2.5–2.6%.
  • RBI’s FY26 forecast sees CPI at 3.7% overall, with Q1 at 2.9%, Q2 at 3.4%, Q3 at 3.9%, and Q4 at 4.4%.

 

Indian Trends

Trade and External Sector

  • The U.S. has extended the suspension of reciprocal tariffs on Indian goods to August 1, giving exporters temporary relief and allowing more time to finalise a trade deal. India has a trade surplus of $41.18 billion with the U.S.
  • Talks are progressing on a goods-focused trade pact, with the first tranche likely by Sep-Oct 2025. The extension also gives India a potential competitive edge as tariffs hit other nations.

Infrastructure and Investment Climate

  • The PLI Scheme, covering 14 sectors, has attracted ₹1.76 lakh crore in investment, generated ₹16.5 lakh crore in output, and created 12 lakh jobs (direct + indirect).
  • Sector-wise: Pharmaceuticals: ₹2.66 lakh crore sales, 83.7% domestic value addition.                                                    Bulk drugs: India moved from a net importer to a net exporter.                                                                                                    Food Processing: ₹3.8 lakh crore in sales; major rural & MSME impact.                                                                           Textiles: Technical textiles exports rose to $3.35 billion in FY25.
  • RBI’s revised infrastructure lending norms cut provisioning for under-construction projects from 5% to 1%, effective Oct 1, 2025 — expected to revive credit flow to infra.

Indian Trends

Banking & Financial Stability

  • Gross NPAs hit a multi-decade low of 2.3% in March 2025, down from 2.6% in Sep 2024. The highest GNPA contribution came from agriculture (6.1%).
  • Despite risks, RBI’s stress tests show all banks remain solvent, even under severe adverse scenarios. No bank is projected to breach Tier 1 capital thresholds.
  • Contagion simulations show manageable risks from NBFC or HFC failures, with solvency losses capped under 4% of Tier 1 capital in worst-case scenarios.

External Debt Snapshot

  • India’s external debt rose 10% YoY to $736.3 billion as of March 2025, now 19.1% of GDP (vs 18.5% in FY24).
  • Long-term debt (>1 year) dominates at $601.9 billion. USD-denominated debt leads at 54.2%, followed by INR at 31.1%.

Employment and Labour Market

  • The government has launched the Employment-Linked Incentive (ELI) Scheme, with a budget of ₹99,446 crore, targeting 3.5 crore formal jobs by July 2027, of which 1.9 crore would be first-time formal workers.
  • The scheme offers: ₹15,000 to employees (in two tranches) and ₹3,000/month subsidy to employers for new hires over 2–4 years (EPFO-linked).
  • While the scheme aims to formalise India’s 90% informal workforce, challenges remain in execution, fraud monitoring, and incentivising sustained hiring.

Indian Trends

 Consumption and Demand Trends

  • Urban consumption showed a mild rebound in Q1FY26, particularly in packaged goods, fashion, jewellery, and personal care, helped by easing inflation and improved sentiment.
  • Rural demand remained relatively soft, and unseasonal weather affected beverage and agri-input-linked categories.
  • Sectoral commentary points to: FMCG and retail recovery, though still below pre-pandemic momentum. Discretionary consumption is gradually picking up as input costs ease (palm oil, crude derivatives).
  • Axis Securities notes that a full demand recovery may take 1–2 more quarters, with key risks from geopolitical tensions, supply chains, and oil prices.

Consumption and Demand Trends

Sources

https://www.troweprice.com/personal-investing/resources/insights/global-markets-weekly-update.html

https://economictimes.indiatimes.com/small-biz/trade/exports/insights/charting-the-global-economy-us-jobs-data-eases-pressure-on-fed/articleshow/122276153.cms

https://economictimes.indiatimes.com/small-biz/trade/exports/insights/charting-the-global-economy-consumer-spending-weakens-in-us/articleshow/122138398.cms

 

https://business.bofa.com/en-us/content/market-strategies-insights/weekly-market-recap-report.html

https://www.cnbc.com/2025/07/04/trumps-tariffs-deadline-is-looming-for-europe-heres-where-things-stand.html

https://www.cnbc.com/2025/07/07/trump-says-countries-aligning-with-brics-bloc-will-face-extra-tariff.html

https://www.cnbc.com/2025/06/23/-what-china-thinks-about-the-escalating-iran-israel-conflict.html

https://economictimes.indiatimes.com/opinion/et-editorial/one-big-slow-descent-to-the-foggy-bottom/articleshow/122255798.cms

https://www.thehindu.com/business/gross-gst-collection-double-in-five-years-to-record-2208-lakh-crore-in-fy25/article69754988.ece

https://www.businesstoday.in/india/story/retail-inflation-seen-at-25-or-lower-in-june-bob-report-483410-2025-07-07

https://timesofindia.indiatimes.com/business/india-business/donald-trump-tariffs-relief-for-indian-exporters-as-us-delays-deadline-interim-trade-deal-talks-continue/articleshow/122313743.cms

https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2139489

https://groww.in/blog/rbi-tightens-project-finance-norms-for-banks-and-nbfc

https://bfsi.economictimes.indiatimes.com/articles/indian-banks-remain-resilient-rbis-latest-financial-stability-report-reveals-strong-solvency/122171258#:~:text=The%20Indian%20banking%20system%20remains%20resilient%20and%20solvent,of%20India%20%E2%80%99s%20%28RBI%29%20latest%20Financial%20Stability%20Report.

https://www.business-standard.com/industry/banking/bank-gnpas-fall-to-multi-decade-low-of-2-3-in-march-may-rise-by-fy27-rbi-125063001030_1.html

https://www.business-standard.com/industry/banking/bank-gnpas-fall-to-multi-decade-low-of-2-3-in-march-may-rise-by-fy27-rbi-125063001030_1.html

https://www.cnbctv18.com/economy/betting-big-on-formalisation-could-indias-ambitious-employment-generation-scheme-transform-its-informal-workforce-19633045.htm

https://www.devdiscourse.com/article/business/3499040-market-recovery-hinges-on-economic-momentum-axis-securities-report

https://www.msn.com/en-in/money/topstories/food-to-fashion-companies-see-demand-recovery-signs/ar-AA1I97q3?ocid=BingNewsVerp

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