The labor market continues to show resilience despite GDP contraction. In April, the U.S. added 177,000 jobs, surpassing expectations, though slightly below March’s revised 185,000 figure. The unemployment rate held steady at 4.2%. However, initial jobless claims rose by 18,000 to 241,000 in the week ending April 26—the highest in two months—and total unemployment benefit recipients reached 1.92 million, the most since November 2021. These indicators suggest potential softening in employment conditions, although layoffs remain relatively contained. Meanwhile, consumer sentiment dipped to its lowest since May 2020, highlighting consumer jitters despite rising real incomes and near-full employment. 

Inflation data present a mixed picture. The Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation measure, rose 2.3% year-on-year in March, easing slightly from 2.5% in February. However, core PCE, excluding volatile food and energy prices, increased by 0.3% month-on-month and 2.6% annually, signaling persistent underlying inflation pressures. Costs sensitive to tariffs may add further inflationary pressure; notably, April’s ISM manufacturing survey reported input prices hitting multi-year highs as new import duties took hold. IPC data similarly suggest rising material costs ahead. 

Business surveys paint a nuanced economic picture. Manufacturing remains in contraction territory, with the ISM Manufacturing PMI declining to 48.7 in April from 49.0 in March. This five-month low highlights persistent factory output weakness, strained supply chains, and high input costs due to tariffs. New orders remain subdued, though slightly improved from recent lows. Conversely, the services sector saw modest growth, with the ISM Services PMI unexpectedly rising to 51.6 in April from 50.8 in March, supported by stronger new orders and steady expansion. Collectively, these indicators suggest the U.S. economy is at an inflection point—robust consumer spending and resilient job growth maintain momentum, but trade frictions and manufacturing weakness pose significant risks. 

The Federal Reserve faces a challenging balancing act managing rates amid this uncertainty. Despite administrative pressures for rate cuts, the Fed is likely to hold steady during its May meeting. The economy, buoyed by employment and consumer spending, appears stable now—but potential tariff-driven inflation and further slowdowns pose substantial risks. 

Recent economic data from Europe indicate continued modest growth paired with easing inflation. Eurozone GDP rose by 0.4% quarter-on-quarter in Q1, an acceleration from 0.2% in Q4 and slightly above expectations. Growth, though moderate, was supported by improved household incomes driven by falling energy prices and fiscal measures. Euro area inflation stabilized at 2.2% year-on-year in April, with core inflation also trending downward, driven by easing energy and stable food prices. 

The Eurozone’s unemployment rate remained at a record-low 6.2% in March, down from 6.5% a year ago, reflecting resilient hiring, especially in services, despite modest output growth. This robust employment underpins consumer confidence, though job creation could moderate in upcoming months. Overall, Europe’s economy shows steady, albeit fragile, growth, contingent on avoiding further external shocks. 

China’s recent economic data present a mixed outlook. GDP growth accelerated to 5.4% year-on-year in Q1 2025, surpassing expectations due to a March surge in activity. Industrial production jumped 7.7% year-on-year, and retail sales rose 5.9%. However, China faces deflationary pressures, with consumer prices falling in March for the second consecutive month, driven by weak domestic demand and an oversupply of goods exacerbated by trade tensions. 

Manufacturing momentum has slowed sharply. The official manufacturing PMI dropped to a 16-month low of 49.0 in April, down from 50.5 in March, reflecting declining export orders amid escalating U.S. tariffs. Despite a temporary surge in March exports (up 12.4% year-on-year) ahead of tariff deadlines, underlying data show weakening commodity imports, indicative of softening demand amid continued trade frictions. 

The global economy is at a delicate juncture. Major economies are expanding but face growing strains. Global GDP growth is expected to moderate in 2025, likely settling in the mid-2% range unless trade tensions ease quickly. Positively, global inflation pressures are moderating, potentially enabling central banks to pivot toward growth support if needed. Moreover, economies like India and Southeast Asia remain bright spots, offering resilience amid broader global uncertainty.