|
|||||||||
|
|
|||||||||
|
Executive Summary
Geopolitical and trade uncertainty stayed elevated in February, with inflation back in focus as consumers and producers expecting higher prices; industry sentiment still positive despite slow growth.
Trade policy is notably uncertain in the context of potential tariffs, with both the monthly Global Economic Policy Uncertainty Index and the Trade Policy Uncertainty Index spiking. US consumers are of two minds: sentiment paradoxically differs according to whether consumers are considering their own local economy or further afield, a phenomenon that can perhaps best be characterized as the “I am OK but you are not OK” economy. This economic environment finds central bank policies divided into two camps, with many playing a waiting game the see how inflation develops. India and the UK did cut interest rates this month. On February 7, the Reserve Bank of India (RBI) reduced rates for the first time in nearly five years to counter slower growth, cutting the repo rate to 6.25% (from 6.5%). It also announced a raft of measures to inject durable liquidity into the banking system. Two days earlier, a majority of the Bank of England’s Monetary Policy Committee voted to reduce the Bank Rate by 0.25 percentage points, to 4.5%. The two dissenting members had voted for a larger 0.5 percentage point rate reduction. The European Central Bank (ECB) cut key interest rates by 25 basis points on January 30. The recovery among developed markets continues, while emerging markets face some challenges. The Conference Board’s February projections anticipate real GDP growth in the eurozone to be 0.8% in 2024, 0.9% in 2025, and 1.3% in 2026—revised down by –0.1 pp in 2025 and –0.1 pp in 2026 from a month ago. In the UK, quarter-on-quarter headline GDP growth is expected to slow to around 0.4% in Q1 2025, pick up to almost 1.5% by Q4 2025, and then decline to below 1.5% in 2026. India’s FY26 GDP growth is anticipated to be in the range of 6.3–6.8% in the context of current global uncertainties. Across economies, consumer confidence has dipped as inflation expectations have risen. The US consumer confidence index (Conference Board) declined in January to 104.1, from a revised 109.5 in December. In Brazil, consumer confidence has been lingering below the neutral 100 mark and fell to 86.2 in January (91.3 in December) to reach its lowest level since February 2023, with elevated borrowing costs a likely factor in denting confidence. Even so, consumers kept spending in December and January, attributable in part to the holiday season. US retail and food services sales for January (adjusted for seasonal variation and holiday and trading-day differences) were $723.9 billion—representing a –0.9% drop from December’s revised $730.3 billion. Consumption during the Chinese New Year holiday was robust, hinting at a change of mood among Chinese consumers with sales revenues in consumer-related industries climbing by 10.8% year on year. Notably, China’s New Year holiday box office receipts reached another record high as movie-goes spent $1.3 billion over the eight-day holiday period. Inflation expectations are headed in the wrong direction, reaching their highest level in almost two years, driven perhaps by the fear of tariff increases. US inflation expectations were unchanged at 3.0% at both the one- and three-year-ahead horizons in January, but median five-year-ahead inflation expectations rose 0.3 percentage points to 3.0%, the January Survey of Consumer Expectations reveals. Indeed, inflationary pressures returned in January with most price metrics on the rise. Commodity prices grew in February, with the exception of energy, which remained muted. However, higher tariffs on steel and aluminum, along with increased uncertainty, resulted in higher prices for industrial metals. In contrast, the FAO Food Price Index declined, primarily due to improved global supply conditions for sugar and vegetable oils, as well as lower meat prices driven by increased production and lower demand. The price of gold—a traditional hedge in times of uncertainty—continued to surge on account of renewed inflation fears and the general geopolitical and economic environment, but Bitcoin declined in February on the back of security concerns and regulatory uncertainty, following initial optimism for the new US administration’s pro-cryptocurrency policy. |
|||||||||
|
|
|||||||||
|
|||||||||
|
|
|||||||||
|
Inflationary trends appear to be diverging across surveyed economies. The US Consumer Price Index (CPI) rose 3.0% for the 12 months ending January 2025, up from the 2.9% rise over the 12 months ending December. Core inflation climbed slightly to 3.3% (annualized). In the eurozone, January’s headline inflation is expected to be 2.5%, mainly owing to base effects in energy prices (2.9% month on month). Core inflation is expected to be 2.7% and services inflation 3.9%. Meanwhile, the UK is expected to see quite a sharp near-term rise in inflation, according to the Bank of England’s February Monetary Policy Report. Headline CPI inflation is expected to rise to 3.7% in 2025 Q3. This largely reflects recent developments in global energy costs and regulated prices. Inflation is expected to fall back to the 2% target after that. |
|||||||||
|
|
|||||||||
|
|||||||||
|
|
|||||||||
|
December unemployment rates remained stable across most surveyed economies, although India saw a 0.3 percentage point rise. More recent data from the US saw unemployment edge down a little to 4.0% in January (3.5% in January 2020). Total nonfarm payroll employment increased by 143,000. China’s surveyed urban employment rate was 5.2% in January (5.1% in December 2024), while the youth unemployment rate rose slightly to 16.1% (15.7% in December 2024).
Despite increased economic volatility, asset volatility was unchanged in February, with government bond yields remaining stable. Most markets rebounded, with a February rally on Russia’s stock market sparked by hopes that the war in Ukraine is reaching a conclusion. In the US, January saw the S&P 500 climb 2.7%, bringing the one-year return to 24.6%, while the Dow Jones gained 4.7% over the month, to register 14.5% annual growth. January also saw the CBOE Volatility Index average 16.4 (17.3 in December). In contrast, India’s equity market fell by 0.3% in January 2025, following a 2.4% drop in December 2024. This decline was driven by uncertainty around US trade policy, weak global signals with declining US stock futures, and concerns over AI disrupting services business in India. World trade volume increased by 1.1% in December 2024, driven by growth across imports and exports in advanced economies. In December, exports saw a decrease in the US and Brazil, and increased for China; imports rose in the US and China, compared to November. The Container Throughput Index declined to 131.2 points (133.6 in November). Chinese ports experienced a reduction in port trade, reflected in its container throughput index, while European throughput rose sharply. Total port trade remained below the year-ago level but continued to recover in December. The supply chain index indicates a more stable supply chain environment, but risks stemming from geopolitical uncertainty and potential inflationary pressures persist. Looking more closely at individual economies, we see that December’s exports reached $266.5 billion in the US, $7.1 billion lower than November’s total. Imports were $364.9 billion, $12.4 billion more than in November. The monthly deficit increased by 24.7% to $98.4 billion. China saw an improvement in overall trade growth across the whole of 2024, with exports increasing by 5.9% (–4.7% in 2023) and imports rising by 1.1% (–5.5% in 2023). India’s trade deficit in goods widened slightly to $22.9 billion from $21.9 billion in December, potentially attributable to a rising import bill driven by a rapidly depreciating currency—the rupee lost 1.4% in value compared with the US dollar from the start of the year up to mid-February. Brazil registered a reduced trade surplus of US $2.2 billion in January (US $4.8 billion in December). Mexico saw a slight decline in both imports and exports, resulting in a trade surplus of $2.56 billion. Last year saw the value of Russian exports contract by 1% from 2023, with the trend worsening towards the end of 2024, ultimately contracting by 6% year on year in Q4. The value of oil and petroleum products increased by about 2%, reflecting higher prices, as volumes fell. The full-year value of imports also contracted by around 1%. As a result, the current account surplus amounted to $53 billion, a small increase from the previous year. However, it shrank in the final months and, in December, turned negative due to reduced exports.
* * *
In “
Tough trade-offs: How time and career choices shape the gender pay gap,” MGI analysis finds that a third of the work-experience pay gap results from women accumulating less time on the job than men—on aggregate working fewer hours, taking longer pauses between jobs, and occupying more part-time roles. However, two-thirds of the gap is due to the divergent career pathways typically pursued by women and men as their careers unfold. Analysis finds that women are more likely to switch to occupations that involve less competitive pressure and fewer full-time requirements.
The research also finds that, as women switch jobs, they are less likely to move into occupations projected to grow in demand, often moving instead into occupations destined to shrink. By 2030, fewer than two-thirds of women would be in occupations projected to grow relative to today if the current trend continues, meaning the overall gender pay gap could remain at current levels. The same report finds that organizations that excel in both financial performance and building human capital set themselves apart from others by rotating people internally, having a focus on coaching, and by fostering a culture that empowers employees while also challenging them. As the future of work evolves, employers can work to position themselves for this future by embracing these principles. . |
|||||||||
|
|
|||||||||
|
|||||||||
|
|||||||||
|
Regional and Country Summary
President Trump signs memo for “fair and reciprocal” tariffs on all US trading partners; Germany looks to form new government; inflation up in UK.
United States US trade deficit widened sharply reaching a record high since 2022; consumer inflation increased at its fastest pace in two years; President Trump signed memorandum calling for “fair and reciprocal” tariffs on all US trading partners. December 2024 exports reached $266.5 billion, $7.1 billion lower than November. December imports were $364.9 billion, $12.4 billion more than November’s imports. The monthly deficit reached $98.4 billion. The Consumer Price Index (CPI) rose 3.0% for the 12 months ending January 2025, up from the 2.9% rise over the 12 months ending December. Core inflation climbed slightly to 3.3% (annualized). Median inflation expectations were unchanged at 3.0% at both the one- and three-year-ahead horizons in January. Median five-year-ahead inflation expectations rose 0.3 percentage points to 3.0%, the January Survey of Consumer Expectations reveals. On the housing market, the 30-year fixed-rate mortgage remains almost unchanged from last month at 6.9%. Existing home sales decreased by 4.9% in January. During January, housing residential starts decreased to 1,366,000 (down from the revised December estimate of 1,515,000). Completions in January rose to 1,651,00, up from 1,534,000 in December. In January, the S&P 500 was up 2.7%, bringing the one-year return to 24.6%; the Dow Jones gained 4.7% over the month, to register 14.5% annual growth. January saw the CBOE Volatility Index average 16.4 (17.3 in December). |
|||||||||
|
|
|||||||||
|
|||||||||
|
|
|||||||||
|
Unemployment edged down a little to 4.0% in January (3.5% in January 2020). Total nonfarm payroll employment increased by 143,000 in January.
Retail and food services sales for January (adjusted for seasonal variation and holiday and trading-day differences) were $723.9 billion—a –0.9% drop from December’s revised $730.3 billion. The consumer confidence index (Conference Board) declined in January to 104.1, from a revised 109.5 in December. The industrial production index increased slightly to 103.5 in January (102.9 in December). January’s manufacturing purchasing managers’ index (PMI) was revised up to 51.2, beating the preliminary estimate of 50.1; the services PMI dropped to 52.9 (56.8 in December). President Donald Trump signed a memorandum on February 13, calling for “fair and reciprocal” tariffs on all US trading partners, directing his advisers to begin calculating new tariff levels. Commerce Secretary Howard Lutnick said that Trump will be ready to move on the new tariffs by April 1. |
|||||||||
|
|
|||||||||
|
|
|||||||||
|
Eurozone
Q4 GDP was 0.1%; headline inflation up to 2.5%; CDU/CSU won Germany’s 2025 election. Q4 GDP growth was 0.1% quarter on quarter. Germany and France both disappointed, contracting by –0.2% and –0.1% quarter on quarter, respectively, while the Italian economy stalled. On the upside, the Spanish economy continued outstripping market forecasts, growing by 0.8% quarter over quarter. Meanwhile, the Conference Board’s February projections anticipate real GDP growth to be 0.8% in 2024, 0.9% in 2025, and 1.3% in 2026—revised down by –0.1 pp in 2025 and –0.1 pp in 2026 from a month ago. In January, headline inflation is expected to be 2.5%, mainly owing to base effects in energy prices (2.9% month on month). While natural gas costs have come down substantially, they remain two to three times higher than pre-COVID-19 levels. Core inflation is expected to be 2.7% and services inflation 3.9%. Producer prices have been in positive territory since November, posting stable month on month figures but a 0.6% year-on-year rise in December 2024. European Central Bank (ECB) projections indicate inflation is expected to be 2.4% in 2024 (–0.1 pp), 2.1% in 2025 (–0.1 pp), and 1.9% in 2026 (unchanged). For core inflation, ECB staff projections are: 2.9% in 2024 (unchanged), 2.3% in 2025 (unchanged), and 1.9% in 2026 (–0.1 pp). |
|||||||||
|
|
|||||||||
|
|||||||||
|
|
|||||||||
|
ECB cut key interest rates by 25 basis points on January 30. Despite somewhat stickier headline inflation, the sluggishness of the eurozone economy alongside the ECB’s conviction that inflation will return to target were strong arguments for this decision.
Forward-looking indicator, Eurocoin ticked up to 0.39 in January from 0.33 in December. The industrial production index decreased by 1.1% month on month and fell by 2.0% year on year in December. The composite purchasing managers’ index (PMI) rose to 50.2 in January (49.6 in December); the services PMI was slightly down at 51.3 in January (December: 51.6); the manufacturing PMI rose to 46.6. European shares hit a record high on February 19, driven by gains in defense stocks amid expectations of increased military spending in the region. Italy’s Leonardo surged 8.1%, while Sweden’s Saab AB jumped 16.2%. German conglomerate Thyssenkrupp, planning to spin off its warship division TKMS, soared 19.8% to its highest level in over a year. US and Russian delegations met in Riyadh to discuss the conflict in Ukraine. Representatives from Europe or Ukraine were not present. On February 23, the Christian Democrat CDU/CSU alliance, led by Friedrich Merz, won Germany’s 2025 election, with Alternative for Germany (AfD) finishing second and the Social Democrats (SPD) third. The election saw a record turnout of 83.5%, the highest since reunification in 1990. |
|||||||||
|
|
|||||||||
|
|
|||||||||
|
United Kingdom
CPI inflation rose to 3% in January; quarterly GDP grew marginally by 0.1% in Q4 2024; the BoE cut its policy rate in February and projects increases in both inflation and GDP growth; OECD also expects modest GDP growth. According to the Bank of England’s February Monetary Policy Report, headline consumer price index (CPI) inflation is expected to rise quite sharply in the near term, to 3.7% in 2025 Q3. In large part this reflects recent developments in global energy costs and regulated prices. Inflation is expected to fall back to the 2% target after that. Quarter-on-quarter headline GDP growth is expected to slow to around 0.4% in Q1 2025, pick up to almost 1.5% by Q4 2025, and then decline to below 1.5% in 2026. The OECD’s latest Economic Outlook for the UK projects 0.4% growth in 2024, picking up slightly to 1.7% in 2025 and 1.3% in 2026, with inflation expected to remain slightly above the 2% target in the range 2.3–2.7%. Quarterly real GDP is estimated to have grown by 0.1% quarter-on-quarter in Q4 2024, following no growth the previous quarter. The services sector grew by 0.2% in Q4 2024; construction also grew, by 0.5%, while production fell by 0.8%. Monthly real GDP is estimated to have grown by 0.4% in December 2024, largely because of growth in the services sector, following an unrevised growth of 0.1% in November 2024. UK CPI rose to 3% in January, mainly driven by transport, and food and alcoholic beverages, but partially offset by housing and household services. Core inflation (which excludes energy, food, alcohol, and tobacco) rose to 3.7%, from 3.2% in December. On February 6, the BoE Monetary Policy Committee voted to cut the policy rate to 4.5%. Manufacturing companies face weak demand, low confidence, and rising costs. The seasonally adjusted S&P Global UK Manufacturing PMI posted 48.3 in January, up from December’s 11-month low of 47.0. The start of 2025 has seen manufacturing production, new orders, and employment continue to contract in the face of weak demand and lackluster business and consumer confidence at home and abroad. |
|||||||||
|
|
|||||||||
|
|||||||||
|
|
|||||||||
|
The UK Services PMI registered 50.8 in January, down fractionally from December’s 51.1, its joint-lowest for 15 months (equaling that seen in November 2024). The latest reading was also well below the pre-pandemic average and signaled only a marginal increase in service sector output. Output, new orders, employment, and stocks of purchases all declined, whereas average vendor lead times lengthened. Nevertheless, January’s reading marks continued expansion, as it remains above the 50 neutral threshold.
The UK Construction PMI fell to 48.1 in January, down sharply from December’s 53.3, to register below the 50.0 no-change threshold for the first time since February 2024. Construction companies cited delayed decision making by clients on major projects and general economic uncertainty that weighed on business activity at the start of 2025. Latest data showed that house building (index at 44.9) decreased for the fourth successive month and at the fastest pace since January 2024. In Q3 2024, growth in average total pay was 4.3%, as real total pay rose 1.4%. UK unemployment was estimated at 4.4%. The UK economic inactivity rate (for people aged 16 to 64 years) was estimated at 21.5% in Q4 2024, below estimates of a year ago, and down in the latest quarter. The estimated number of vacancies in Q4 2024 was 819,000, a drop of 9,000 in November to 2024 to January 2025. Vacancies declined for the 31st consecutive period but remain above COVID-19 levels. British PM Sir Keir Starmer indicated he may put British troops in Ukraine if there is a deal between Ukraine and Russia. The comments came before talks between Ukraine and European leaders in Paris on 17 February. Meanwhile, the UK government has announced that Russian oligarchs with links to the Kremlin can now be banned from the UK, as part of a fresh sanctions package on Russia. |
|||||||||
|
|
|||||||||
|
|
|||||||||
|
In emerging economies, China saw manufacturing expectations decline in January, India’s RBI looks to inject liquidity; Mexico economic outlook remains uncertain.
China
In January, the PMIs for manufacturing and services declined, while new social financing surged; employment remained largely stable; inflation stayed low. Consumption during the Chinese New Year holiday experienced double-digit growth. The official Purchasing Managers’ Index (PMI) for manufacturing fell into the contraction zone, recording 49.1 in January, down from 50.1 in December 2024. Among the sub-indexes that make up the manufacturing PMI, the production index recorded 49.8 (down from 52.1 in December 2024), and the new orders index registered 49.2 (down from 51.0 in December 2024), indicating a contraction in both supply and demand in industrial activities. Meanwhile, the official services PMI also declined but remained in the expansion zone, reporting 50.3 in January, compared to 52.0 in December 2024. New social financing reached a historical high of RMB 7.1 trillion in January, up from RMB 2.9 trillion in December 2024, with new bank loans totaling RMB 5.2 trillion being the primary component of the new credit. This increase can partly be attributed to the tendency of Chinese banks to front-load loans at the beginning of the year, as well as an effort to improve the economic outlook for 2025. Total social financing amounted to RMB 415.2 trillion in January, marking an 8.0% year-on-year increase. |
|||||||||
|
|
|||||||||
|
|||||||||
|
|
|||||||||
|
The surveyed urban employment rate was 5.2% in January (5.1% in December 2024). The youth unemployment rate rose slightly to 16.1% in January (15.7% in December 2024).
Consumer prices saw a moderate increase of 0.5% in January, up from 0.1% in December 2024. The food consumer price index rose by 0.4%, while the non-food CPI increased by 0.5% in January. Producer prices deflated by –2.3% in January, remaining unchanged from December 2024. Due to the Chinese New Year holiday, which causes delays in data releases, most of the available economic data are from December 2024. Throughout the whole of 2024, there was improvement in overall trade growth, with exports increasing by 5.9% (–4.7% in 2023) and imports rising by 1.1% (–5.5% in 2023). Industrial production growth accelerated to 5.8% (4.6% in 2023). However, floor space sold for new houses fell by –14.1% (–17.3% in 2023). Consumption during the Chinese New Year holiday was robust, with sales revenues in consumer-related industries increasing by 10.8% year on year. Goods consumption rose by 9.9%, while services consumption surged by 12.3%. Additionally, China’s New Year holiday box office receipts reached a record high of $1.3 billion. Spending by movie-goers surpassed last year’s record box office receipts of $1.12 billion over the same eight-day period. |
|||||||||
|
|
|||||||||
|
|
|||||||||
|
India
The beginning of 2025 saw significant volatility for India's economy—slumping equity market, shrinking liquidity, declining consumption, and depreciating rupee; announcement of FY 2025–26 budget, anticipated changes in US tariff policies, and global uncertainties shaping economic landscape. Over the past decade, consumption by India’s 294 million households has nearly tripled, reaching $2.07 trillion. This surge has positioned household consumption as the primary driver of India’s $4 trillion economy, contributing approximately 60% of the GDP. However, since the fiscal year ending in March 2023, consumer spending has shown signs of decoupling from the trajectory of national output, indicating a weakening trend. In order to boost consumer spending, Minister of Finance Nirmala Sitharaman’s 2025 budget is highly focused on introducing significant income tax cuts, specifically targeting the middle class. India’s FY26 GDP growth is anticipated to be in the range of 6.3–6.8% in the context of current global uncertainties. Economists expect inflation to be under control and consumption to remain stable. Consumer inflation is likely to fall to a five-month low of 4.6% in January 2025 compared to 5.2% recorded in December last year. The purchasing managers’ index (PMI) for January indicated a strong upturn in the manufacturing sector, driven by rising exports as well as domestic demand. The services PMI numbers have lost growth momentum. This is because most companies are making fewer hires and paying less. |
|||||||||
|
|
|||||||||
|
|||||||||
|
|
|||||||||
|
The trade deficit in goods widened slightly to $22.9 billion from $21.9 billion in December, potentially attributable to a rising import bill driven by a rapidly depreciating currency. The rupee lost 1.4% in value compared with the US dollar from the start of the year up to mid-February.
The Indian equity market fell by 0.3% in January 2025, following a 2.4% drop in December 2024. This decline was driven by uncertainty around US trade policy, weak global cues with declining US stock futures, and concerns over AI disruptions on the services sector in India. Liquidity in India’s banking system has been shrinking and reached its lowest level in nearly 15 years. According to a Bloomberg Economics index, on January 26 the banking system cash deficit hit 3.3 trillion rupees ($37.8 billion) for the first time since April 2010. The Reserve Bank of India (RBI) announced a host of measures to inject durable liquidity into the system, including a 60 billion rupee ($686.6 million) bond purchase, a 56-day variable repo rate auction of 50 billion rupees ($572.2 million), and a $5 billion USD/rupee buy/sell swap auction for a six-month tenure. |
|||||||||
|
|
|||||||||
|
|
|||||||||
|
Brazil
Inflation dropped for second consecutive month; composite PMI fell, recording weakest expansion since 2021; unemployment rate rose slightly. Inflation fell to 4.56% in January (4.83% in December), down for a second consecutive month and reaching its lowest level since September 2024. However, the rate of inflation continues to breach the Central Bank’s target upper limit of 4.50%. On 29 January, the Banco Central do Brasil’s Monetary Policy Committee (Copom) followed through on its announced intention to raised the Selic rate from 12.25% to 13.25%. Copom anticipates another adjustment of the same magnitude in the upcoming meeting if the scenario for inflation convergence evolves as expected. Looking ahead, the committee emphasizes that the extent of the tightening cycle will depend on inflation dynamics and reaching the inflation target. On the financial markets, the monthly average exchange rate was BRL 6.02 per US dollar in January (6.12 in December), down for the first time since November 2023. January saw the Bovespa equities index rise, earning 4.9% in value. Consumer confidence lingers below the neutral 100 mark and fell to 86.2 in January (91.3 in December) to reach its lowest level since February 2023, with elevated borrowing costs a likely factor in denting confidence. Business confidence fell to 94.8 in January (96.6 in December), down for a third month running. |
|||||||||
|
|
|||||||||
|
|||||||||
|
|
|||||||||
|
Brazil’s manufacturing industry remained in expansion territory at the beginning of the year, with the purchasing managers’ index (PMI) for manufacturing up slightly from 50.4 in December to 50.7 in January. Although factory orders continued to grow at the start of 2025, the rate of expansion was marginal and the weakest since the current growth trend began in January 2024. New export business continued on a downward path in January, sightly falling for a third straight month. Brazilian manufacturers registered broadly stagnant production volumes in January, ending a four-month sequence of expansion.
The services PMI fell to 47.6 in January (from 51.6 in December) to drop below the neutral 50 level for the first time since September 2023. This was driven by a decline in new business inflows that prompted firms to trim output to the greatest extent since April 2021. This reversal of fortunes was accompanied by an intensification of inflationary pressures, with both input costs and output charges rising at their steepest rates in two-and-a-half years. However, there was a marginal increase in services employment. After signaling a full year of growth in 2024, the composite PMI slipped into contraction territory during January, falling to 48.2 (from 51.5 in December), to record its fastest reduction since April 2021. January’s balance of trade registered a surplus of US $2.2 billion (US $4.8 billion in December), driven by a larger rise in imports (US $23.0 billion in January compared to US $20.1 billion in December) than exports (US $25.2 billion in January versus US $24.9 billion in December). The three-month moving average unemployment rate rose slightly to 6.2% in December (6.1% in November), up for the first time in nine months, and lower than the year-ago period (7.4%). On February 19, chief prosecutor Paulo Gonet charged former president Jair Bolsonaro with leading a “criminal organization” aiming to overturn the 2022 election results. Allegations include a plot to poison President Luiz Inácio Lula da Silva and assassinate Supreme Court Justice Alexandre de Moraes. Bolsonaro denies the claims as a political prosecution. |
|||||||||
|
|
|||||||||
|
|
|||||||||
|
Russia
Slowing output growth at the end of 2024 and in 2025; substantial fiscal stimulus continues; inflation accelerated further amid monetary tightening; foreign trade contracted last year.
According to preliminary estimates, Russian GDP growth for the whole of 2024 was 3.5–4.0%, following a sharp slowdown during the second half of the year. Fastest growth was seen in industries directly serving the war effort, but higher expenditures also supported the broader economy. Forward-looking indicators suggest a further slowdown in 2025, with most recent forecasts confirming GDP growth expectations at around 1.5–1.7%. Despite significant stimulus, output gains have become constrained by available capacity. Preliminary figures show federal budget spending rose by 24% last year (in nominal terms), with most growth occurring in the “defense” category. Federal revenues increased by 26%, with 30% of it coming from oil and gas. The deficit amounted to 1.7% of GDP, more than double the original assumption in the 2024 framework, but about the same size as in 2022–23. The deficit has been funded with assets from the National Wealth Fund (NWF). Since the invasion of Ukraine, the amount of liquid assets held by the NWF has declined from 9.8 trillion to 3.8 trillion rubles. This year’s budget framework anticipates a deficit of 0.5% of GDP. Given the fact it is based on rather optimistic assumptions, the actual deficit this year could well exceed the target again. While Russia can handle a larger-than-planned deficit, it would further complicate its financial situation. |
|||||||||
|
|
|||||||||
|
|||||||||
|
|
|||||||||
|
The ongoing stimulus has started to be reflected in prices, with annual inflation approaching 10% in December and January. Inflation pressure was further increased by a sharp ruble weakening episode in late 2024. To cope with inflationary pressures, the Central Bank of Russia has kept the key interest rate at a historical high of 21% since October, prompting discussions with government expecting the bank to support the economy through lower cost of credit.
The 2024 value of Russian exports contracted by 1% from 2023, with the trend worsening towards the end of the year, ultimately contracting by 6% year on year in Q4. The value of oil and petroleum products increased by about 2%, reflecting higher prices, as volumes fell. The full-year value of imports also contracted by around 1%. As a result, the current account surplus amounted to $53 billion, a small increase from the previous year. However, it shrank in the final months and in December turned negative due to reduced exports. On February 18, US and Russian diplomats met in Saudi Arabia to reestablish bilateral ties and explore an end to the Ukraine conflict. Nothing concrete was agreed on key issues. Ukraine and European countries did not participate in the talks. |
|||||||||
|
|
|||||||||
|
|
|||||||||
|
Mexico
Inflation declined to 3.6% in January; trade balance posted a surplus; unemployment decreased. In January, the annual inflation rate dropped to 3.6% (from 4.2% in December), the lowest recorded since January 2021 and within the Banco de México’s target range of 2–4%. Mexico’s Consumer Price Index (CPI) increased to 138.3 points, up from 138 points in December, indicating a 0.28% rise. This uptick was primarily driven by higher transportation costs. On the markets, the monthly average exchange rate in January was MXN 20.6 = USD 1 (up from MXN 20.3 in December). Mexico’s purchasing managers’ index (PMI) for manufacturing dropped from 49.8 in December to 49.1 in January. Mexican manufacturers started 2025 on a weaker note, cutting back further as slow demand and an uncertain future pushed them to reduce costs and safeguard their cash flow. In December, Mexico saw a slight decline in both imports and exports, resulting in a trade surplus of $2.56 billion. Exports fell to $51.7 billion from $52.0 billion in November, driven by lower automotive manufacturing and oil exports. Meanwhile, imports dropped to $49.1 billion from $52.2 billion, primarily due to a decline in non-oil imports across final, intermediate, and capital goods. |
|||||||||
|
|
|||||||||
|
|||||||||
|
|
|||||||||
|
In December, Mexico saw a slight decline in both imports and exports, resulting in a trade surplus of $2.56 billion. Exports fell to $51.7 billion from $52.0 billion in November, driven by lower automotive manufacturing and oil exports. Meanwhile, imports dropped to $49.1 billion from $52.2 billion, primarily due to a decline in non-oil imports across final, intermediate, and capital goods.
Mexico’s economic outlook for 2025 has worsened due to uncertainty surrounding US President Donald Trump’s current and proposed tariffs on Mexican exports. In response, the Bank of Mexico cut its GDP growth forecast from 1.2% to 0.6%, citing weak private investment, slowing consumption, and declining public spending. The economy had already contracted by 0.6% in the final quarter of 2024, marking its first decline since 2021. Uncertainty has also rattled financial markets, with analysts revising their growth projections downward, some to as low as 0.3% for 2025. Despite the central bank’s caution, President Claudia Sheinbaum remains optimistic, emphasizing government efforts to attract investment and counterbalance external risks. In response to Trump’s tariff threats, the Sheinbaum administration is actively engaged in negotiations to mitigate risks, prioritizing measures to combat drug trafficking, impose stricter controls on Chinese imports, and enhance immigration enforcement to address US concerns. With crucial trade decisions on the horizon, Mexico’s economic outlook remains uncertain and faces considerable challenges in an increasingly protectionist global environment. |
|||||||||
|
|
|||||||||
|
|||||||||
|
|
|||||||||
|
|||||||||
|
McKinsey’s Global Economics Intelligence (GEI) provides macroeconomic data and analysis of the world economy. Each monthly release includes an executive summary on global critical trends and risks, as well as focused insights on the latest national and regional developments. Detailed visualized data for the global economy, with focused reports on selected individual economies, are also provided as PDF downloads on McKinsey.com. The reports available free to email subscribers and through the
McKinsey Insights App. To add a name to our subscriber list,
click here. GEI is a joint project of
McKinsey’s Strategy and Corporate Finance Practice and the
McKinsey Global Institute.
The data and analysis in McKinsey’s Global Economics Intelligence are developed by Jeffrey Condon, a senior expert in McKinsey’s Atlanta office; Krzysztof Kwiatkowski is an expert in the Greater Boston office; and Sven Smit, a senior partner in the Amsterdam office. The authors wish to thank Nick de Cent, as well as José Álvares, Cristina Barrantes, Roman Büschgens, Darien Ghersinich, Yifei Liu, Marianthi Marouli, Tomasz Mataczynski, Frances Matamoros, Mario Rojas, Erik Rong, Vanshika Tandon, Valeria Valverde, and Sebastian Vargas for their contributions to this article. |
|||||||||
|
|||||||||
|
The invasion of Ukraine continues to have deep human, as well as social and economic, impact across countries and sectors. The implications of the invasion are rapidly evolving and are inherently uncertain. As a result, this document, and the data and analysis it sets out, should be treated as a best-efforts perspective at a specific point of time, which seeks to help inform discussion and decisions taken by leaders of relevant organizations. The document does not set out economic or geopolitical forecasts and should not be treated as doing so. It also does not provide legal analysis, including but not limited to legal advice on sanctions or export control issues.
|
|||||||||
|
|
|||||||||
|
