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Executive Summary
Global growth remains uneven as the world contends with policy uncertainty and trade realignments. The US government shutdown—now the longest in history—adds near-term downside risks, while renewed US–China tariff talks and a gradual easing of inflation provide cautious optimism. Activity is steady in services but weakening in manufacturing.
A US federal government shutdown, which began on October 1, continues at the time of writing, making it the longest in history by surpassing the previous record of 35 days set in 2018–19. The Congressional Budget Office estimates the shutdown could cut up to $14 billion from GDP if unresolved for a further month. One consequence of the shutdown in the US is that the Bureau of Labor Statistics, Bureau of Economic Analysis, and Census Bureau have all delayed releases of major reports, including September employment, October inflation data, and third-quarter GDP estimates. Meanwhile, US President Donald Trump and China’s President Xi Jinping met in South Korea on October 30 for ongoing trade talks. The US agreed to lower the tariffs on Chinese imports imposed to curb fentanyl flows by removing ten percentage points of the cumulative rate, effective November 10, 2025, and would maintain its suspension of heightened reciprocal tariffs on Chinese imports until the same date. (The current 10% reciprocal tariff will remain in effect during this suspension period.) China is to suspend the new export controls on rare earths and related measures that it announced on October 9, 2025. In a similar fashion, President Luiz Inacio Lula da Silva met President Trump on the sidelines of the ASEAN summit in Kuala Lumpur, Malaysia, on October 26 in a bid to ease tensions between the two countries. Their respective teams planned to start tariff discussions immediately. Elsewhere, negotiations toward a trade deal between India and the United States face hurdles, including US demands for access to India’s bioenergy market. China’s GDP recorded a resilient year-on-year growth rate of 4.8% In the third quarter of 2025, albeit slower than the Q2 pace of 5.2%. However, year-to-date GDP growth reached 5.2% and remains comfortably above the annual target of 5.0%. Consumption accounted for over half of GDP growth (56.6%), followed by net exports (24.5%) and investment (18.9%). Seasonally adjusted Q3 GDP data showed the eurozone grew 0.2% versus the previous quarter, according to a flash estimate released on October 30. The eurozone economy has proven resilient to an adverse geopolitical environment, showing slow but positive growth in Q3, with continued dynamics similar to the 0.1% quarterly expansion realized in Q2. The slow growth outlook remains the baseline forecast for the near-term, with 2026 GDP growth forecasts for the eurozone of between 0.8% and 1.2%. In the UK, monthly GDP estimates indicate the economy is expanding at a modest 1.1–1.5% annualized pace, supported almost entirely by the services sector. Manufacturing and construction continue to contract, pointing to broad-based weakness outside services. In September, Mexico’s economic activity declined 0.6% year on year, while edging up just 0.1% month on month, signaling near stagnation. The drop was mainly driven by an approximate 3% contraction in the secondary sector (manufacturing, construction, mining, and electricity), partially offset by a modest 0.8% increase in services. Russia’s economy continued its sluggish performance in August, with GDP growth estimated at 0.4% year on year, as in July. Over January to June, growth amounted to 1.2%, still driven by war-related industries and household demand, which was supported by a tight labor market and faster real wage growth. Recent forecasts for Russia place its GDP growth below 1% this year (BOFIT, Oxford Economics, and World Bank), with a further slowdown possible in 2026. Public spending will continue to support domestic demand, as well as production in industries directly linked to the war effort. Russia already utilizes nearly all of its production capacity, so further increases in public spending can only yield limited returns. Additionally, private sector activity—both consumption and investment—will be adversely affected by tighter monetary policy. At its October meeting, the US Federal Reserve lowered the target range for the federal funds rate by 25 basis points to 3.75–4%, marking a second consecutive reduction. The committee noted that economic growth remains moderate, job gains have slowed, and uncertainty surrounding the outlook has increased. In Russia, meanwhile, the Central Bank of the Russian Federation lowered the key interest rate by 50 basis points to 16.5% in October, reducing the size of the cut from 100 basis points seen in previous months. Economic pressures are forcing Russia’s central bank to walk a fine line between curbing inflation and preventing growth from stalling. Other central banks have been more cautious. Both the European Central Bank (ECB) and the Bank of England (BoE) held rates, with the ECB sticking to 2.0% amid easing inflation and slow growth, while the BoE’s Monetary Policy Committee maintained a 4.0% policy rate in both October and November. It was a similar story elsewhere. In Brazil, the Banco Central do Brazil’s Monetary Policy Committee (Copom) held the Selic rate at 15% in a unanimous decision. India also held rates, but a sustained decline in inflation strengthened the case for potential cuts going forward. Consumer confidence remains below the long-term average, suggesting continued caution in spending. In the US, the Consumer Confidence Index (Conference Board) dropped one point in October to 94.6, from a revised 95.6 in September. UK sentiment is gloomy with consumer confidence deeply negative based on the overall state of the economy. In Brazil, consumer confidence remained below the neutral 100 mark, with the FGV’s seasonally adjusted September figure trending up to 87.5 (86.2 in August). Business confidence also went up slightly to 89.9 (from 89.4 in August). |
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In general, retail sales picked up in September. In the UK, however, although retail sales rose 1.5% month on month in September, levels continue below pre-COVID-19 benchmarks, indicating weak underlying demand.
Overall inflation expectations eased by 0.1 percentage points for both the medium and long term. In September, US median inflation expectations increased at the one-year-ahead horizon to 3.4% from 3.2% and, at the five-year-ahead horizon, to 3.0% from 2.9%. They remained steady at the three-year-ahead horizon, at 3.0%. On the commodities markets, precious metal prices continue to rise rapidly, driven by heightened uncertainty surrounding geopolitical tensions. Gold has been reaching new record highs, fueled by rising demand. However, oil prices are continuing to drop, having fallen to around $60 per barrel as demand weakens and production increases. Food prices declined globally in September, providing some breathing room for consumers. Inflation among developed economies continues to accelerate and is moving away from most central banks’ targets. In the US, the consumer price index (CPI) rose 3.0% for the 12 months ending September, after increasing 2.9% over the 12 months ending August. Core inflation was slightly up, to 3.0% (annualized). In the eurozone, headline inflation ticked up to 2.2% in September, but the rise was entirely driven by a smaller annual decline in energy prices. Core inflation remained stable at 2.3% for the fourth consecutive month. However, in the UK, it’s a different story: inflation remains elevated. Headline CPI inflation reached 3.8% in September, one of the highest rates among developed economies, largely driven by transportation and hotels/recreation prices. The IMF warns that inflation could remain persistently high into 2026, although pressures are expected to ease gradually next year as temporary factors fade. Among developing countries, by contrast, consumer price inflation is mainly easing, driven largely by declining food prices. India’s retail inflation eased dramatically in September, down from August’s 2.07% to 1.54%—the lowest since June 2017. The drop was driven mainly by a sharp fall in food prices, especially vegetables, pulses, and fruits, with food inflation recorded at –2.28%. However, in Brazil, inflation was slightly up, touching 5.17% in September (5.13% in August) and remains above the central bank’s upper target limit of 4.50%. Similarly, annual inflation in Mexico rose to 3.8% in September from 3.6% in August. The global manufacturing purchasing managers’ index (PMI) stabilized in September, signaling modest growth; the services sector remains resilient though it has been expanding at a slower pace. In the eurozone, recent confidence indicators—the composite PMI and the Economic Sentiment indicator—have only slightly improved on Q2. Most countries saw subdued manufacturing activity amid soft demand and trade headwinds; India remained a bright spot, maintaining strong though moderating growth. The HSBC India Manufacturing PMI rose slightly to 58.4 in October 2025 from 57.7 in September, preliminary data showed. The reading signaled stronger operating conditions and marked a robust expansion, supported by sustained growth in output and new orders. In the US, the industrial production index dropped slightly to 103.9 in August. October’s manufacturing PMI rose to 52.5, from 52.0 in September. Brazil’s manufacturing production rose slightly: the Monthly Industrial Physical Production (PIM) Index increased from 112.2 in August to 113.8 in September (versus the neutral 100 line). The rise was driven by increased extractive production, which grew 1.3%, while factory production was up 0.7%. On aggregate, however, August 2025’s results are 0.7% below those for the same period last year. By contrast, the UK manufacturing PMI stayed below the 50 threshold, signaling ongoing contraction. Most survey respondents cited weakening domestic and external demand as the main headwinds. Industrial production showed a mild monthly improvement but still recorded negative growth year on year. Similarly, the S&P Global Mexico Manufacturing PMI dropped from 50.2 in August to 49.6 in September, indicating a deterioration in overall operating conditions. The PMI has now been in sub-50.0 contraction territory in 14 of the past 15 months (August being the sole exception). New orders rose, though at a slow pace, while new export orders fell for a 19th consecutive month, with weaker demand from Europe and the US partly offset by Asia and South America. |
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Global services activity softened in September 2025, though it remained broadly expansionary across most major economies. Among individual developed economies, the US services PMI climbed to 55.2 in October (54.2 in September). The UK services sector continues to expand, albeit at a slower pace. India’s services sector remained well in the expansion zone, although the PMI eased to 58.8, from 60.9 the previous month. In Brazil, the Monthly Services Survey (PMS) revenue index slid to 125.7 in August from 126.8 in June (versus the neutral 100 line). This was mirrored in the volume index, which was down to 110.6 (from 111.6).
In the UK, payroll employment has stagnated since late 2024, while unemployment has edged higher. The number of claimants remains well above pre-pandemic levels, and job vacancies have fallen to their lowest level in nearly a decade (excluding the pandemic period). In China, the overall surveyed urban unemployment rate stood at 5.2% at the end of Q3 (5.0% for Q2). The youth unemployment rate increased to 17.7% in September (14.5% in June). Meanwhile, Brazil’s three-month moving average unemployment rate was stable at 5.6% in September. In Mexico’s labor market, total unemployment rose to 2.74% in September (2.66% in August)—the highest level this year. Formal employment saw a moderate increase of 116,800 jobs. However, the rate of informal employment reached 54.9%—with 33.1 million people in vulnerable employment—compared to 54.2% in September 2024. August and September were strong months for investors, with equities in several countries—including the US and Japan—reaching new record highs, while volatility remains relatively low. On the US equity markets the S&P 500 was up 2.3% in October, bringing the one-year return to 16.3%; the Dow Jones gained 2.5% over the month and was up 11.8% year to date. The CBOE Volatility Index averaged 18.1 (15.8 in September). Financial markets offered some relief for the UK economy in October. Equities gained around 3% month on month, reaching new historical highs. The rally was broad-based across sectors, with non-technology companies outperforming their technology counterparts. Among developing economies, the Indian stock market proved resilient despite global volatility, with the SENSEX climbing 5.30% in October. Brazil’s Bovespa equities index boomed in September, rising 3.4% in value; however, October results up until the 24th were already indicating a change in mood after two strong months, with only 0.02% of upside. The cost of capital remains elevated across the board. Globally, seaborne trade softened in September, as container throughput fell 0.8%. Inbound spot freight rates fell in September, cooling from mid-2025 highs, while outbound freight rates to Shanghai eased in August after June’s sharp spike. Global supply chain pressures remain close to long-run averages after several months of stability. In the third quarter, China’s cross-border trade witnessed a continued recovery, registering a year-on-year growth rate of 5.4%, compared to 3.1% in Q2. Specifically, exports growth were stable at 6.5%, compared with 6.0% in Q2. Meanwhile, imports returned to expansion, from –0.9% in Q2 to 3.9% in Q3. In Europe, the immediate outlook for businesses is being shaped by still lower global demand and US tariffs affecting exports. Trade tensions will also hit investment via weaker business sentiment, with many corporates taking a “wait and see” approach and putting investment plans on hold. However, the trade agreement with the US should support a moderate improvement in activity next year, as firms may have more clarity on their business outlook. Meanwhile, the UK’s external trade remains turbulent. The overall trade deficit widened, driven mainly by rising imports, while exports stayed relatively stable. Goods trade continues to face headwinds from global trade rebalancing, even as net services exports continue to improve. India’s merchandise trade deficit widened significantly to $32.15 billion in September 2025, with $68.53 billion in imports and $36.38 billion in exports, driven primarily by gold imports, silver, fertilizers, and electronics. Mexico also recorded a trade deficit, recorded at US $2.4 billion in September, as exports grew slightly to US $56.5 billion (up from US $55.7 billion in August), while imports rose to US $58.9 billion (up from US $57.7 billion). Imports of intermediate goods grew some 19.6% year on year, while non-oil input imports rose around 20.7%, outpacing export growth and driving the overall deficit expansion. In contrast, Brazil’s trade balance for October (aggregate up to the third week) recorded a surplus of US $3.3 billion, according to preliminary data, up from US $2.9 billion in September. The bigger surplus was driven by a reduction in exports (US $18.3 billion in October, down from US $30.5 billion in September) accompanied by a drop in imports (US $15 billion in October, down from US $27.5 billion in September). A new report from the McKinsey Global Institute (MGI) argues that, by many measures, the world has become increasingly out of financial kilter this century. Out of balance: What’s next for growth, wealth, and debt? estimates global wealth at $600 trillion. However, wealth has outgrown GDP since 2000 with paper gains powering this rise. Every $1 invested generated $2 in debt. Today, the top 1% of people hold at least 20% of the wealth. Meanwhile, cross-border financial imbalances are growing. What does this mean for the global economy? Productivity is the key going forward. MGI has constructed a “global balance sheet” of the world’s assets and liabilities offering a fresh perspective on the economy. The best outcome by far is for productivity to accelerate, allowing countries to grow their way to balance sheet health. Among four potential scenarios, only one is positive: productivity acceleration restores balance while maintaining wealth and growth. Other scenarios are less benign. Sustained inflation would shrink real wealth and debt relative to GDP but weaken household budgets and business planning. Worse, a balance sheet reset could trigger wealth losses and years of scant growth. Another option would be to maintain the imbalance and return to secular stagnation with super-low interest rates—but this would be accompanied by tepid growth and ongoing risks. With productivity acceleration being the best outcome for wealth and growth, what are the takeaways? The prescription varies for individual economies, although it will be challenging everywhere and what happens in one economy may affect the others. Europe would have to invest, China consume, and the United States save—each about 3–7% of GDP. With a new era of uncertainty and divergence from historical balance sheet patterns potentially already with us, business leaders can benefit from understanding what balance-sheet-driven economic scenarios mean for their strategies and from monitoring the swing factors between them. The global balance sheet helps measure whether policy changes, business developments, and consumer trends add up to enough. This lens may inform corporate strategy better than point forecasts or daily financial and political noise. |
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Regional and Country Summary
Fed cuts rates by 25 basis points for the second consecutive month; Eurozone grew 0.2% over previous quarter; Bank of England faces delicate policy balance between inflation and stagnation.
United States Federal Reserve cuts rates by 25 basis points for the second consecutive month; month-long US government shutdown drags on. At its October meeting, the Federal Reserve lowered the target range for the federal funds rate by 25 basis points to 3.75–4%, marking a second consecutive reduction. The Committee noted that economic growth remains moderate, job gains have slowed, and uncertainty surrounding the outlook has increased. The US government has remained closed since October 1 after Congress failed to pass spending legislation, with 11 Senate votes since then ending in stalemate over healthcare and spending priorities. The Congressional Budget Office estimates the shutdown could cut up to $14 billion from GDP if unresolved for a further month. In October, the S&P 500 was up 2.3%, bringing the one-year return to 16.3%; the Dow Jones gained 2.5% over the month and was up 11.8% year to date. During October, the CBOE Volatility Index averaged 18.1 (15.8 in September). On the housing market, the 30-year fixed-rate mortgage decreased slightly to 6.3% in October. Existing home sales rose 1.5% in September. During August, housing residential starts decreased to 1,307,000 (below the revised July estimate of 1,429,000)—an 8.5% drop. Completions in August were up to 1,608,000, an 8.4% increase from a revised June estimate of 1,483,000. The consumer price index (CPI) rose 3.0% for the 12 months ending September, after rising 2.9% over the 12 months ending August. Core inflation was slightly up, to 3.0% (annualized). In September, median inflation expectations increased at the one-year-ahead horizon to 3.4% from 3.2% and, at the five-year-ahead horizon, to 3.0% from 2.9%. They remained steady at the three-year-ahead horizon, at 3.0%. |
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The industrial production index decreased slightly to 103.9 in August. October’s manufacturing purchasing managers’ index (PMI) rose to 52.5 (52.0 in September); the services PMI increased to 55.2 (54.2 in September).
August’s retail and food services sales (adjusted for seasonal variation and holiday and trading-day differences) were $732.0 billion: up 0.6% from July’s revised $727.4 billion. The Consumer Confidence Index (Conference Board) dropped one point in October to 94.6, from a revised 95.6 in September. July exports reached $280.5 billion, $0.8 billion more than in June. July imports were $358.8 billion, $20.0 billion more than June’s imports. The monthly deficit rose by 32.5% to $78.3 billion. Total nonfarm payroll employment changed little in August (+22,000) and has shown little change since April. The unemployment rate rose to 4.3%. The Bureau of Labor Statistics, Bureau of Economic Analysis, and Census Bureau have delayed releases of major reports, including September employment, October inflation data, and third-quarter GDP estimates, as operations are suspended during the government shutdown. |
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Eurozone
Recent data confirms slow growth in Q3; near-term activity outlook looks subdued owing to weaker global demand and uncertainty; inflation remains around 2% target; interest rates remain on hold. Seasonally adjusted Q3 GDP grew 0.2% versus the previous quarter, according to a flash estimate released on October 30. The eurozone economy has proven resilient to an adverse geopolitical environment, showing slow but positive growth in Q3, with continued dynamics similar to the 0.1% quarterly expansion realized in Q2. Recent confidence indicators—the composite purchasing managers’ index (PMI) and the Economic Sentiment indicator—have only slightly improved on Q2. Retail sales and industrial production indicators are also estimated to be broadly flat in Q3, with slim likelihood of an imminent positive turnaround. The slow growth outlook remains the baseline forecast for the near-term, with 2026 GDP growth forecasts of between 0.8% and 1.2%. The variation is attributable to the expected impact of weaker global demand and heightened uncertainty. Household spending will remain the main growth engine, still underpinned by a strong labor market and real incomes growth. Yet, low consumer sentiment and a high level of savings could moderate spending. Increased defense spending will also support growth; however, the impact of the large fiscal expansion in Germany will broadly be offset by fiscal consolidation in several other countries. The immediate outlook for businesses will be shaped by still lower global demand and US tariffs affecting exports. Trade tensions will also hit investment via weaker business sentiment, with many corporates taking a “wait and see” approach and putting investment plans on hold. However, the trade agreement with the US should support a moderate improvement in activity next year, as firms may have more clarity on their business outlook. |
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Headline inflation ticked up to 2.2% in September, but the rise was entirely driven by a smaller annual decline in energy prices. Core inflation remained stable at 2.3% for the fourth consecutive month. The disinflation process in services prices has halted in recent months, but with softer wage growth in 2026, it may resume soon. Nevertheless, price pressures remain muted, and headline inflation is expected to stick around or even fall below the 2% target in the near term.
The European Central Bank (ECB) kept its key interest rate at 2.0% amid easing inflation and slow growth. A broadly stable outlook and balanced risks suggest a relatively high bar for further policy adjustments. EU leaders agreed a new package of sanctions against Russia that, combined with the US measures, tightens the grip on liquified natural gas imports from Russia. However, they failed to explicitly endorse a plan to release up to €140 billion of frozen Russian assets to fund Ukraine’s war effort. In the Netherlands, Rob Jetten, leader of centrist party Democrats 66 (D66) has claimed victory in a closely fought election with Geert Wilders’ Freedom Party. |
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United Kingdom
Inflationary risks in the UK ticked up again, keeping the country among those advanced economies with the highest rates of inflation. Despite marginal improvement in consumption, growth remains narrowly driven by services while the broader economy stagnates. The Bank of England faces a delicate policy balance as inflation remains sticky while the labor market softens. Monthly GDP estimates indicate the economy is expanding at a modest 1.1–1.5% annualized pace, supported almost entirely by the services sector. Manufacturing and construction continue to contract, pointing to broad-based weakness outside services. Inflation remains elevated. Headline consumer price index (CPI) inflation reached 3.8% in September, one of the highest rates among developed economies, largely driven by transportation and hotels/recreation prices. The IMF warned that inflation could remain persistently high into 2026, although pressures are expected to ease gradually next year as temporary factors fade. Cost-of-living pressures remain acute: real wage growth of only 1% leaves households with little buffer against rising prices. Consumer confidence is deeply negative, with respondents citing the overall economy as the main drag on sentiment. Although retail sales rose 1.5% month on month in September, levels continue below pre-COVID-19 benchmarks, indicating weak underlying demand. Payroll employment has stagnated since late 2024, while unemployment has edged higher. The number of claimants remains well above pre-pandemic levels, and job vacancies have fallen to their lowest level in nearly a decade (excluding the pandemic period). |
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With inflation still high but growth slowing, the Bank of England is maintaining a wait-and-see stance, seeking clearer evidence of disinflation before easing policy. The central bank’s challenge is to support activity without reigniting inflationary pressures—a balance that will define the policy path into early 2026.
The production side remains subdued. The manufacturing purchasing managers’ index (PMI) stayed below the 50 threshold, signaling ongoing contraction. Most survey respondents cited weakening domestic and external demand as the main headwinds. Industrial production showed a mild monthly improvement but still recorded negative growth year on year. Services, on the other hand, continue to expand—albeit at a slower pace. External trade remains turbulent. The overall trade deficit widened, driven mainly by rising imports, while exports stayed relatively stable. Goods trade continues to face headwinds from global trade rebalancing, even as net services exports continue to improve. Financial markets offered some relief in October. Equities gained around 3% month on month, reaching new historical highs. The rally was broad-based across sectors, with non-technology companies outperforming their technology counterparts. Government bond yields have been hovering around 4%, reflecting persistent inflation, tight monetary policy, and growing budget deficit pressures. In a highly unusual move for a Chancellor of the Exchequer (finance minister), Rachel Reeves held a press conference three weeks ahead of her annual budget speech in Parliament. In a presentation widely seen as presaging significant tax rises in the budget, she refrained from ruling out hiking national insurance, VAT, or income tax—contrary to election manifesto pledges. She cited poor productivity (blamed on various Conservative administration policies including austerity, Brexit, and infrastructure spending cuts), persistent global inflation, and uncertainty around US tariffs. She will deliver her budget speech on November 26. |
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China’s Q3 GDP recorded a resilient growth rate of 4.8% year on year; RBI revises up India’s real GDP growth forecast for FY 2025–26; Russia growth expected to slow sharply amid mounting imbalances.
China
China’s economy continued to show resilience in Q3, with GDP expanding 4.8%, although investment growth showed visible decline and real estate market remained weak; trade regained momentum. In the third quarter of 2025, China’s GDP recorded a resilient growth rate of 4.8% year on year, slower than the Q2 pace of 5.2%. Year-to-date GDP growth reached 5.2% and remained well above the annual target of 5.0%. Consumption accounted for over half of GDP growth (56.6%), followed by net exports (24.5%) and investment (18.9%). By sector, the industrial sector’s GDP growth rebounded to 5.8% year on year from 4.8% in Q2. However, the services sector’s GDP growth dropped to 5.4% from 5.7% in Q2. In the third quarter, fixed-asset investment growth fell rapidly to –6.2%, from 2.1% in Q2. The deceleration occurred across sectors: investment growth in manufacturing, real estate, and infrastructure declined respectively to –1.2%, –19.1%, and –5.2%, from 6.7%, –12.5%, and 4.0% in Q2. Private investment sentiment tended to be weaker, with a slower growth rate of –7.3% in Q3, compared with –1.1% in Q2. Real estate market growth continued to slide in the third quarter. On the demand side, sales revenue in new residential properties declined −13.1% in Q3 (–9.9% in Q2). On the supply side, floor space started fell −15.5% in Q3, around the same pace as in Q2 (–15.9%). In Q3, new credit decreased to RMB 7.2 trillion, down from RMB 7.6 trillion in Q2. Additionally, on a year-on-year basis, it declined –4.5% in Q3. Meanwhile, total social financing reached RMB 430.2 trillion by September, marking an 8.7% year-on-year increase. The overall surveyed urban unemployment rate stood at 5.2% at the end of Q3 (5.0% for Q2). The youth unemployment rate increased to 17.7% in September (14.5% in June). |
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In the third quarter, cross-border trade witnessed a continued recovery, registering a year-on-year growth rate of 5.4%, compared to 3.1% in Q2. Specifically, exports growth were stable at 6.5%, compared with 6.0% in Q2. Meanwhile, imports returned to expansion, from –0.9% in Q2 to 3.9% in Q3.
According to data released by the Ministry of Commerce, foreign direct investment (FDI) inflows into China increased by 2.5% in July and August combined versus the same period last year (–21.9% in Q2). On October 30, President Xi Jinping and US President Donald Trump met in South Korea for ongoing trade talks. The US agreed to lower the tariffs on Chinese imports imposed to curb fentanyl flows by removing ten percentage points of the cumulative rate, effective November 10, 2025, and would maintain its suspension of heightened reciprocal tariffs on Chinese imports until the same date. (The current 10% reciprocal tariff will remain in effect during this suspension period.) China is to suspend the new export controls on rare earths and related measures that it announced on October 9, 2025. |
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India
India’s economy shows strength despite global uncertainty and continued structural pressures. RBI revises up India’s real GDP growth forecast for FY 2025–26 to 6.8%, from earlier 6.5% estimate. The HSBC India Manufacturing PMI rose slightly to 58.4 in October 2025 from 57.7 in September, preliminary data showed. The reading signaled stronger operating conditions and marked a robust expansion, supported by sustained growth in output and new orders. The services PMI eased to 58.8, from 60.9 the previous month. India’s infrastructure output grew 3.0% year on year in September 2025, marking a sequential deceleration. Crude oil declined by 1.3% and refinery products by 3.7%. Natural gas dropped 3.8% and coal output was down by 1.2%. Fertilizers grew by 1.6%, while cement and steel increased 5.3% and 14.1% respectively. Electricity generation rose 2.1%. This represents a steep drop from August’s revised 6.5% growth, reflecting a concentrated slowdown in certain core sectors that form 40% of the industrial production base. US sanctions on Russian crude have constrained energy supply, causing energy-intensive sectors to lag demand-driven ones. Strong domestic demand persists, but weakening energy support is creating a structural bottleneck to growth. India’s retail inflation eased dramatically in September, down from August’s 2.07% to 1.54%—the lowest since June 2017. The drop was driven mainly by a sharp fall in food prices, especially vegetables, pulses, and fruits, with food inflation at –2.28%. This sustained decline keeps inflation well below the Reserve Bank of India’s (RBI) 4% target, strengthening the case for potential rate cuts and signaling improved price stability for consumers. However, the RBI only revised its FY 2025–26 consumer price index (CPI) forecast down to 2.6%, maintaining a cautious outlook regarding transient food price effects. Despite global volatility, the Indian stock market proved resilient, with the SENSEX climbing 5.30% in October. |
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Overall, the impact was offset by global liquidity prospects and reinforced by the Securities and Exchange Board of India’s (SEBI) new surveillance measures on derivatives (effective from October 1), which seek to curb excessive speculation.
India’s merchandise trade deficit widened significantly to $32.15 billion in September 2025, with $68.53 billion in imports and $36.38 billion in exports, driven primarily by gold imports, silver, fertilizers, and electronics. Negotiations toward a trade deal between India and the United States face hurdles, including US demands for access to India’s bioenergy market. RBI continued taking steps to manage liquidity, maintaining the policy repo rate at 5.50% and retaining the neutral stance in its October 1 review. The RBI discontinued 14-day Variable Rate Repo/Variable Rate Reverse Repo (VRR/VRRR) operations, shifting to more flexible shorter-tenor (primarily 7-day) operations for fine-tuning liquidity management. |
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Brazil
Stabilizing inflation and almost full employment are main positives amid high-interest-rate scenario. Inflation was slightly up, touching 5.17% in September, compared with 5.13% in August. Inflation remains above the central bank’s upper target limit of 4.50%. The three-month moving average unemployment rate was stable at 5.6% in September. On the financial markets, the average monthly real–US dollar exchange rate was BRL 5.36 per USD in September (versus BRL 5.44 in August). The Bovespa equities index boomed in September, rising 3.4% in value; however, October results up until the 24th were already indicating a change in mood after two strong months, with only 0.02% of upside. Consumer confidence remained below the neutral 100 mark, with the FGV’s seasonally adjusted September figure trending up to 87.5 (86.2 in August). Business confidence also went up slightly to 89.9 (from 89.4 in August). |
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Brazil’s manufacturing production rose slightly: the Monthly Industrial Physical Production (PIM) Index increased from 112.2 in August to 113.8 in September (versus the neutral 100 line). The rise was driven by increased extractive production, which grew 1.3%, while factory production was up 0.7%. On aggregate, however, August 2025’s results are 0.7% below those for the same period last year.
The Monthly Services Survey (PMS) revenue index slid to 125.7 in August from 126.8 in June (versus the neutral 100 line). This was mirrored in the volume index, which was down to 110.6 (from 111.6). The largest revenue decrease was in accommodations (down 10.5% since June), followed by services to families (down 9.5%). Both sectors also saw the biggest volume decreases, down 12.5% and 10.3% respectively. The standout positive result was the “other land transportation services” segment, which recorded a revenue increase of 4.5% accompanied by a volume increase of 4.7%. At the Banco Central do Brazil’s Monetary Policy Committee (Copom) meeting on September 16, the Selic rate was held at 15% in a unanimous decision. Copom emphasized that the current level will be maintained “for a rather long period,” as the “current scenario, with increased uncertainty, demands caution in the monetary policy conduction.” The hawkish tone expressed indicated that the Central Bank “will not hesitate in rerunning the adjustment cycle if it is appropriate.” October’s (aggregate up to the third week) trade balance recorded a surplus of US $3.3 billion, according to preliminary data, up from US $2.9 billion in September. The bigger surplus was driven by a reduction in exports (US $18.3 billion in October, down from US $30.5 billion in September) accompanied by a drop in imports (US $15 billion in October, down from US $27.5 billion in September). On October 26, President Luiz Inacio Lula da Silva met with US President Donald Trump on the sidelines of the ASEAN summit in Kuala Lumpur, Malaysia, in a bid to ease tensions between the two countries. Their respective teams planned to start tariff discussions immediately. |
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Russia
Sluggish economic performance; growth expected to slow sharply amid mounting imbalances; inflation has dropped slightly, while monetary easing has been continued; fiscal consolidation planned for next year; new sanctions increase pressure on economy.
Russia’s economic performance continued its sluggish performance in August, with GDP growth estimated at 0.4% year on year, as in July. Over January to June, growth amounted to 1.2%, still driven by war-related industries and household demand, which was supported by a tight labor market and faster real wage growth. Recent forecasts for Russia place its GDP growth below 1% this year (BOFIT, Oxford Economics, and World Bank), with a further slowdown possible in 2026. Public spending will continue to support domestic demand, as well as production in industries directly linked to the war effort. Russia already utilizes nearly all of its production capacity, so further increases in public spending can only yield limited returns. Additionally, private sector activity—both consumption and investment—will be adversely affected by tighter monetary policy. Heightened inflation that had been driven by those imbalances started to ease—the headline figure ticked down marginally to 8% year to year in September (from 8.1% in August). However, sequential price growth picked up to 0.5% monthly from 0.3%. Because of inflation, the Central Bank of Russia (CBR) has been forced to maintain high interest rates but was recently able to start the easing cycle. At its October meeting, CBR lowered the key interest rate by 50 basis points to 16.5%, reducing the size of the cut from 100 basis points seen in previous months. The central bank is continuously facing the tough task of finding a balance between curbing inflation and preventing growth from stalling. |
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The authorities plan to shrink the federal budget deficit to 1.6% of GDP in 2026 from the amended target of 2.6% this year—the largest deficit since the beginning of the full-scale invasion of Ukraine. Approved measures include hiking VAT to 22% and cuts to other than war-related spending, which may affect domestic demand. Next year’s assumed expenditure growth of 4% in nominal terms translates to a real decline.
The US has added the two largest Russian oil producers to the sanctions list, while the EU has completely banned imports of Russian natural gas from 2027. The new sanctions could potentially have a substantial impact, particularly on Russian exports and budget revenues from oil and gas, piling additional pressure on public finances and the dollar-ruble exchange rate. The current account, which usually stays in surplus, has already flipped to a deficit of $0.9 billion in August, prompting the ruble to weaken to the USD/RUB 80–85 range. |
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Mexico
Economy experiences slower activity and higher inflation, with modest job gains and a wider trade deficit, alongside continued peso stability. In September, annual inflation in Mexico rose to 3.8%, from 3.6% in August. On the currency front, the peso gained ground against the US dollar, averaging 18.5 per dollar through September (18.7 in August). In September, Mexico’s economic activity declined 0.6% year on year, while edging up just 0.1% month on month, signaling near stagnation. The drop was mainly driven by an approximate 3% contraction in the secondary sector (manufacturing, construction, mining, and electricity), partially offset by a modest 0.8% increase in services. The S&P Global Mexico Manufacturing PMI dropped from 50.2 in August to 49.6 in September, indicating a marginal deterioration in overall operating conditions. The purchasing managers’ index has now been in sub-50.0 contraction territory in 14 of the past 15 months (August being the sole exception). New orders rose, though at a slow pace, while new export orders fell for the 19th consecutive month, with weaker demand from Europe and the US partly offset by Asia and South America. |
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In the labor market, total unemployment rose to 2.74% in September (2.66% in August)—the highest level this year. Formal employment saw a moderate increase of 116,800 jobs. However, the rate of informal employment reached 54.9%—with 33.1 million people in vulnerable employment—compared to 54.2% in September 2024.
Mexico recorded a trade deficit of US $2.4 billion in September, as exports slightly grew to US $56.5 billion (up from US $55.7 billion in August), while imports rose to US $58.9 billion (up from US $57.7 billion). Imports of intermediate goods grew some 19.6% year on year, while non-oil input imports rose around 20.7%, outpacing export growth and driving the overall deficit expansion. In terms of exports, growth was concentrated in manufacturing—particularly machinery and special-purpose equipment (+76.2% year on year) and electrical/electronic products (+9.9% year on year)—while the automotive sector weakened slightly, down 0.2% year on year overall and 7.2% to the US. Mexico’s state-owned oil company Pemex has paid down half of its debts to suppliers since President Claudia Sheinbaum took office in October 2024. Chief Executive Victor Rodriguez said in a presentation to Congress that the company had paid 300 billion pesos ($16.33 billion) to suppliers as of September and had used a recently created financial vehicle to pay off supplier debts. Carlos Manzo, a mayor who had vocally criticized drug cartels in Mexico’s avocado capital of Uruapan, was shot and killed attending the Day of the Dead celebrations. Manzo had already been under federal protection following threats against him. This attack is particularly alarming for Mexico because it underscores the growing reach and brazenness of criminal organizations, even against elected officials who are supposed to be under state protection. President Claudia Sheinbaum called an emergency cabinet meeting yesterday and pledged to pursue justice. |
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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
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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, Roman Büschgens, Darien Ghersinich, Gabriel Marini, Marianthi Marouli, Tomasz Mataczynski, Frances Matamoros, Alejandro Morales, Beatriz Oliveira, Erik Rong, Vanshika Tandon, Valeria Valverde, and Sebastian Vargas for their contributions to this article. |
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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.
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