08.27.2025
NOT SO FAST
In the US, we stick to the view that the economy will slow down in Q3 before beginning to reaccelerate in Q4. In aggregate, incoming data remain consistent with our baseline that final private domestic demand is on a gentle slowdown, which will likely flatten entering Q4 as inflation peaks and fiscal policy’s support to investment starts to kick in, preventing the US economy from entering recession this year.
In the EA, incoming data point to anaemic, growth momentum, and we have left our baseline unchanged. Manufacturing activity has returned to contraction, while services are proving to be a weak offsetting force. Meanwhile, employment growth continues to advance on its downward trend, leaving productivity per worker nearly flat in Q2.
In China, policymakers launched targeted interest subsidies for households and service sectors in order to further stimulate an activity pick up in those sectors. We expect a positive, albeit limited, impact on GDP as we stick to our current GDP baseline: structural imbalances and deflationary pressures are set to persist. We continue to expect GDP growth to gradually pick up throughout the rest of the year.
In the US, incoming inflation data along the price chain are under the spotlight as they report mounting pressure (or the lack thereof) where we and the market least expect it. In a nutshell, they point to little evidence of tariff pass -through on goods, while showing a pick-up in services momentum. We take both unexpected dynamics with a grain of salt. On the goods side, yes, tariff-related pressures have been coming in slower than we anticipated, but we think they have room to increase further over the coming months. Meanwhile, on the services side, we expect the July increase in consumer prices momentum to be short-lived, but unexpected developments at PPI level warrant close attention. Against this backdrop, the projected shape of our baseline is unchanged.
In the EA, headline and core HICP inflation were unchanged in July. Beneath the surface of core dynamics, services inflation eased markedly, but this was offset by firmness in core goods. We see some evidence that firmness in core goods might have been driven by seasonal volatility, while softness in services might be more structural, suggesting that underlying core disinflation dynamics are here to stay. We maintain our baseline for a disinflation process that will continue throughout the year.
China’s inflation stalled in July, with CPI flat and core prices slightly higher. Deflationary pressures are set to persist into 2025 amid ongoing domestic demand weakness.
We stick to our view that the Fed will cut rates twice this year, in September and in December. The Fed is now overweighting downside risks to the labor market and underweighting upside risks to inflation. Pending finalisation of our 2026 outlook, we expect the Fed to take the Fed fund rates to 3.00-3.25% next year.
As the ECB seems 1) content with growth momentum hovering close to zero this year and 2) willing to run the risk of undershooting its inflation target so as not to find itself in the position of having to chase inflation in case German fiscal expansion turns out to be inflationary, we now expect the Governing Council to cut rates only once this year (in December) as opposed to twice (September and December) as we previously projected.
We expect the PBoC to pause easing this summer, resuming in early Q4 with 40 bps of rate cuts and possibly one more RRR reduction, as growth concerns persist. The yuan should stay weak amid a dovish stance and sustained pressure from high US tariffs.
FABIO FOIS
Head of Investment Research & Advisory
MATTEO GALLONE
Junior Macroeconomist
VALERIO CEOLONI
Senior EM/FX Strategist
CHIARA CREMONESI
Senior Rates Strategist
Marketing material for professional clients or qualified investors only.
This material does not constitute an advice, an offer to sell, a solicitation of an offer to buy, or a recommendation to buy, sell, or hold any investment or security or to engage in any investment strategy or transaction. ANIMA can in no way be held responsible for any decision or investment made based on information contained in this document. The data and information contained in this document are deemed reliable, but ANIMA assumes no liability for their accuracy and completeness.
ANIMA accepts no liability whatsoever, whether direct or indirect, that may arise from the use of information contained in this material in violation of this disclaimer and the relevant provisions of the Supervisory Authorities.
This is a marketing communication. Please refer to the Prospectus, the KID, the Application Form and the Governing Rules (“Regolamento di Gestione”) before making any final investment decisions. These documents, which also describe the investor rights, can be obtained at any time free of charge on ANIMA website (www.animasgr.it). Hard copies of these documents can also be obtained from ANIMA upon request. The KIDs are available in the local official language of the country of distribution. The Prospectus is available in Italian/English. Past performances are not an indicator of future returns. The distribution of the product is subject to the assessment of suitability or adequacy required by current regulations. ANIMA reserves the right to amend the provided information at any time. The value of the investment and the resulting return may increase or decrease and, upon redemption, the investor may receive an amount lower than the one originally invested.
In case of collective investment undertakings distributed cross-border, ANIMA is entitled to terminate the provisions set for their marketing pursuant to Article 93 Bis of Directive 2009/65/EC.
