S&P Global Ratings
Economic Research
Our economists are responsible for developing the macroeconomic forecasts and risk scenarios used by S&P Global Ratings' analysts during the ratings process, as well as leading key cross-sector and cross-divisional research projects.
Global Economic Outlook Q3 2025: Unpredictable U.S. Policy Clouds Global Growth Prospects
U.S. policy unpredictability, led by tariffs, continues to cloud the global macro picture.
Activity is generally holding up: consumption remains firm and labor markets remain tight.
Market volatility has fallen as tariffs have been partially paused, but government bond yields have risen, mainly on debt worries; many central banks continue to gradually ease policy rates.
Our growth numbers are broadly unchanged from our last quarterly update, although policy unpredictability implies unusually wide confidence bands.
Risks remain on the downside, with the recent military escalation between Israel and Iran adding to the tariff uncertainty mix.
North America
Economic Outlook U.S. Q3 2025: Policy Uncertainty Limits Growth
S&P Global Ratings Economics forecasts below-potential U.S. real GDP growth of 1.7% in 2025 and 1.6% in 2026 as growth is restrained by slower population growth, tariffs, and the federal government’s cost-cutting initiatives.
We expect weaker growth in the near-term to soften the labor market further in the next 12 months, with the unemployment rate rising to 4.6% by the first half of next year before gradually returning to its long-run average of 4.1% by mid-2027.
We believe tariffs will settle below their April peak in the coming months but still materially higher than 2024. We therefore anticipate core consumer price inflation of 3.0%-3.5% by the end of the year.
We expect the fed funds rate will be 3.75%-4.00% by end-2025 and will reach its nominal neutral of 3.00%-3.25% by end-2026.
EMEA
Economic Outlook Eurozone Q3 2025: Strength From Within
We do not expect tariff-related volatility to hamper the ongoing recovery in domestic demand. Public spending on infrastructure and defense should boost growth from 2026.
We expect core inflation will remain close to the European Central Bank's (ECB's) target. Further rate cuts are unlikely, unless new shocks occur.
Our forecasts remain contingent on the outcome of trade negotiations. In a severe tariff scenario, we could reduce our eurozone growth forecasts for 2025-2026 by 0.4%, with the ECB potentially resuming rate cuts.
Asia-Pacific
Economic Outlook Asia-Pacific Q3 2025: Resilience May Vary
While U.S. tariffs are hitting China's exports, relatively resilient domestic demand should contain the economic slowdown. We expect China's GDP growth to be 4.3% in 2025 and 4.0% in 2026.
U.S. tariffs, the elevated uncertainty about them, and soft Chinese imports will weigh on Asia-Pacific economies. We expect favorable domestic demand to limit the slowdown in overall GDP growth in 2025, but less so in the more export-oriented economies.
With inflation not a major risk, more focus on growth risks and external factors unlikely to significantly constrain monetary policy easing, we expect Asia-Pacific central banks to continue to cut policy rates.
Emerging Markets
Economic Outlook Emerging Markets Q3 2025: Tariffs' Direct Impact Is Modest So Far, But Indirect Effect Will Feed Through
The direct impact of shifting U.S. trade policy on economic growth in emerging markets (EMs) has so far been modest amid lower-than-feared effective tariff levels.
However, we expect the indirect impact of tariffs, namely slower global demand and softer investment due to trade policy uncertainty, to become more noticeable in the coming quarters.
A weaker U.S. dollar will encourage most EM central banks to continue lowering interest rates, partially cushioning the impact of U.S. trade policy uncertainty.
There are significant downside risks to our growth outlook for EMs, such as the potential for higher oil prices amid the escalation of the conflict in Iran, a weaker-than-expected U.S. economy, more upside pressure on long-term U.S. treasury yields, and challenging fiscal dynamics across several EMs.
Climate Economics
Net-Zero Transition Stutters As Geoeconomic Risks Increase
Geoeconomic security concerns are reshaping the transition to net-zero emissions. Immediate risks take precedence over long-term sustainability goals, even though global emissions keep rising.
Weaker climate policy commitments and trade tariffs will slow progress toward net zero, with less public funding available to derisk net-zero technologies and emerging markets. This reduces private sector incentives to invest in clean technologies.
Asia-Pacific (APAC)--particularly China--and the EU will continue to lead the development and adoption of clean technologies. Yet diverging industrial and trade policies will likely continue to create tensions.