Fresh data from the United States and China has revealed mixed economic signals, as inflationary pressures build in the United States U.S. while China’s second-quarter growth slightly exceeds expectations.
Meanwhile, global equity markets posted weekly gains, buoyed by strong corporate earnings and improved investor sentiment.
US Inflation Rises for Second Month
Consumer prices in the United States rose for the second consecutive month in June, according to the US Bureau of Labor Statistics (BLS).
Headline inflation climbed to 2.7% year-on-year (y/y), up from 2.4% in May, driven by persistent food inflation and a moderation in energy price deflation.
Food inflation inched higher to 3.0% y/y (May: 2.9%), with notable increases in prices for food at home (+2.4%) and continued pressure on food away from home (+3.8%).
Meanwhile, core inflation, which excludes volatile food and energy prices, rose by 10 basis points to 2.9% y/y, supported by higher costs in medical care, motor vehicle insurance, and recreation, despite some cooling in shelter prices.
Energy inflation declined at a slower pace (-0.8% y/y vs May: -3.5%), as fuel oil prices contracted mildly and gasoline prices dipped further to -8.3% y/y.
On a month-on-month (m/m) basis, headline inflation rose by 0.3% in June (May: +0.1%). Analysts believe inflation could remain elevated in the near term, as recently imposed tariffs on appliances, electronics, and furnishings begin to pass through to consumer prices.
Retailers are still working through pre-tariff inventories, but notable price hikes in tariff-exposed goods such as appliances and furniture suggest intensifying pressures ahead of H2-2025.
In line with these developments, analysts expect the US Federal Reserve to maintain its current interest rate at its 30 July policy meeting. The CME FedWatch Tool shows a 97.4% probability of a rate hold.
China’s Q2 GDP Beats Forecasts, But Fragility Persists
Meanwhile, China’s economy expanded by 5.2% y/y in Q2 2025, slightly surpassing market expectations of 5.1% and improving on the 4.7% growth recorded in the same quarter of 2024.
The National Bureau of Statistics (NBS) attributed the performance to infrastructure investment, industrial production, and front-loaded exports ahead of US tariff hikes.
Despite the headline beat, underlying momentum remains fragile. Domestic demand continues to lag amid a sluggish property sector and cautious consumer spending. While industrial output improved, retail sales and property investment underperformed.
Quarter-on-quarter, the economy grew by 1.1% (Q1-25: 1.2%).
Looking ahead, analysts expect renewed headwinds in H2-25. Although the US and China recently agreed to a temporary 90-day tariff truce — reducing US tariffs from 145% to 30%, and China’s from 125% to 10% — the ceasefire expires mid-August, and trade uncertainty remains elevated.
Coupled with ongoing challenges in the property market and weak household consumption, the outlook for China’s full-year growth appears constrained.
The IMF recently revised China’s 2025 growth forecast down to 4.0% from 4.6%, reflecting these persistent concerns.
Global Markets End Week on Strong Note
Global equity markets rallied this week, buoyed by strong corporate earnings and positive economic data out of the US and Europe.
Wall Street posted modest gains, with the Dow Jones Industrial Average rising by 0.3% and the S&P 500 up 0.6%, supported by robust Q2 earnings from Netflix, PepsiCo, and United Airlines. Better-than-expected retail sales and jobless claims also lifted investor confidence.
In Europe, the STOXX Europe 600 rose by 0.3% and the The Financial Times Stock Exchange (FTSE) 100 by 0.5%, driven by industrial sector gains and optimism over a potential US–EU trade deal.
Asian stocks tracked Wall Street higher, with the Nikkei 225 gaining 0.6% and China’s SSE Composite up 0.7%, helped by strong tech earnings and stabilising US-China relations.
Emerging and frontier markets also advanced, with the MSCI EM index up 1.0% and the MSCI FM index climbing 1.7%, bolstered by strong performances in Vietnam (+2.1%) and Romania (+4.6%).
