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Germany’s 2025-26 Spending Plans: Delays Threaten Economic Growth and Stability

Germany’s Bold 2025-26 Spending Plans Face Delay, Slowing Short-Term Growth

By Julian Zimmermann | Published: September 26, 2025

Germany may delay extra spending on infrastructure and defense in 2025 and 2026. The delay casts doubt on near-term growth. Scope Ratings notes that the boost to the economy will come slowly. The government’s extra funds may not boost growth as quickly as planned.

Gradual Spending Increase and Its Impact on Growth

Scope Ratings sees that extra government spending could add 0.3 to 0.4 percentage points to GDP growth each year from 2026 to 2030. This spending might bring real GDP growth to about 1.2% per year on average. The positive effect depends on a rise in public investment from 2026, even when spending falls short of set targets.

Half of the planned EUR 59 billion from a EUR 500 billion special fund for infrastructure is set to be used in 2026. Spending is then expected to rise slowly to around EUR 40 billion each year. This sum equals roughly 0.92% of GDP.

Risks Threaten Spending and Economic Output

Several risks may weaken this plan. Under-spending in the public sector can lower private investments and slow growth. Legal and administrative issues can delay projects. Spending may be spread over many years, which would lessen its impact in the short run.

For example, Germany’s federal states receive EUR 100 billion from the fund. They have until 2043 to use these funds. Only one third of the total is set for use by 2029 if projects are approved by 2036. This long timeline shows how hard it is to speed up spending.

Structural Problems Add to the Delay

Slow investment may increase Germany’s growth problems. The country also faces a shrinking working-age population. Other pressures come from high tariffs set by the United States and stronger competition from Chinese manufacturers.

Tax and Debt Predictions Change

Scope Ratings now predicts that Germany’s debt-to-GDP ratio will reach about 70% by 2030. In 2024, this ratio was around 62%. This figure is lower than the earlier estimate of 74% in 2030. Though Germany reached a debt ratio of 81% in 2010, its current level remains high compared to similar nations, which averaged 36% in 2024. Germany’s fiscal deficit is predicted to fall to roughly 2.5% of GDP in 2025 from 2.7% in 2024. This drop comes after the 2025 federal budget was approved on September 18, leaving little time to spend funds. From 2026 through 2030, investment in defense and infrastructure is expected to increase, but still below government targets, leading to an average fiscal deficit of 3.6% of GDP.

Political issues limit extra fiscal flexibility. Changes to the debt brake rule seem unlikely because the current government lacks a two-thirds majority. This situation is hard to change in the current divided political climate.

New Funding Plans and Debt Sales

Germany’s finance agency raised its target for the last quarter of 2025 by EUR 15 billion to EUR 425 billion. A similar increase of EUR 19 billion was made in the third quarter. Although this marks the lowest gross issuance since 2021, net issuance should jump to EUR 94 billion in 2025 from EUR 67 billion in 2024. Net funding needs are expected to average EUR 130 billion each year during 2026-2028. This sum equals roughly 2.7% of the projected GDP.

Targeted and Timely Investment Spending is Needed

The law on the special fund requires that investments in the core government budget stay above 10% of total spending, as in 2024. With flexible accounting and parliamentary choice, the government decides if the rule stays in force.

The 2025 budget shows shifts between the core budget and the special fund. For example, the Federal Ministry of Transport faced net cuts of around EUR 11 billion, with funds moving to the special fund. Meanwhile, the Federal Ministry of Labour and Social Affairs saw a spending rise, mostly for unemployment insurance. This shift shows the government’s ability to move funds quickly, even as it makes the overall economic impact less clear.

For the full economic calendar and the latest updates on global markets, visit FXEmpire.

Julian Zimmermann is a Director who rates Sovereign and Public Sector and Financial Institutions at Scope Ratings. His work focuses on macroeconomics and public finance.

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August 2025 PCE Inflation Update: Core Rate Holds Steady at 2.9%, Impacts on Fed Policy and Consumer Spending

Core PCE Inflation Rate Holds Steady at 2.9% in August 2025, Aligning with Market Expectations

In August 2025, the Federal Reserve tracked its main inflation sign—the Core Personal Consumption Expenditures Price Index—and kept it at an annual rise of 2.9%. Economists saw this result. The core PCE, which leaves out wild swings in food and energy prices, grew 0.2% in the month. This data shows slow and steady inflation.

Key Inflation Figures and Economic Indicators

  • Core PCE Price Index: +0.2% month-over-month; +2.9% year-over-year
  • Headline PCE Inflation Rate: +0.3% month-over-month; +2.7% year-over-year
  • Personal Income: Up 0.4% in August
  • Personal Consumption Expenditures (Spending): Up 0.6%

All these numbers match the Dow Jones consensus forecast. This match gives clear ground for policy steps.

Implications for Federal Reserve Policy

The Federal Reserve has a 2% inflation target. The steady core inflation has not made the Fed change its plan much. After the FOMC cut the federal funds rate by a quarter point, the target range stands at 4%-4.25%. Fed members expect two more rate cuts by the end of 2025. Stock futures rose and Treasury yields fell after the report. The market shows trust in a slow easing cycle as inflation stays steady.

Consumer Spending Resilience Amid Tariff Concerns

The report shows how consumers act while tariffs from President Donald Trump play a role. Forecasts had predicted more inflation, but tariffs did not push up consumer prices much. Firms worked with pre-tariff stock and took cost hikes inside. Spending stayed strong because rising income and a rise in the personal saving rate to 4.6% (up 0.2 percentage points) helped. Prices for goods (+0.1%), services (+0.3%), food (+0.5%), energy (+0.8%), and housing (+0.4%) all moved upward.

Economist Chris Rupkey of Fwdbonds said, “Consumers hit it out of the park with strong gains in spending in August, and they showed a similar trend in June and July. Summer was when consumers returned to active spending after backing away from shops and malls when uncertainty and fear set in after the White House tariff events in April and May.”

Fed’s Outlook on Tariff Effects and Inflation

Fed Chair Jerome Powell and team say tariffs will cause a one-time price push without a lasting rise in core inflation. Some Fed members, however, still worry about the room to ease money policy further. Even if markets bet on another rate cut in October, support for cuts later in the year is less strong.

Summary:
The August 2025 inflation report shows core inflation near 3% and spending and income just above forecasts. Tariff issues do not push prices higher, and strong consumer behavior backs the Fed’s slow rate cut plan. Investors and policymakers now look to new economic data to see where inflation and policy head next.

For more detailed analysis and updates on inflation, Federal Reserve policy, and market trends, stay tuned to CNBC.

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Turbulent Waters Ahead: How U.S.-Canada Tensions Threaten Canadian Banks’ Capital Stability

Former OSFI Deputy Warns Rising U.S. Tensions Heighten Risks to Canadian Bank Capital

September 25, 2025 – Toronto

A former top banking regulator from Canada has warned the nation’s largest banks. He sees rising tensions with the United States as a risk to their overseas assets and capital. Mark Zelmer, who served as deputy superintendent at the Office of the Superintendent of Financial Institutions (OSFI), points out that Canadian banks are more exposed because they work heavily across borders, mainly in the U.S.

On Thursday, the C.D. Howe Institute published a paper by Zelmer. He states that the world is changing. Foreign authorities might soon block assets held by Canadian financial firms when economies are under stress. Such actions could block banks’ access to vital capital. This in turn may lead to serious challenges in liquidity and stability.

Potential Asset Ring-Fencing Amid Rising Tensions

Zelmer recalls the case of Maple Bank in Canada. In 2016, a German bank saw its Canadian assets blocked after it ran into trouble. This past event shows that regulators can stop cross-border capital flows during crises. He warns that the United States or other nations may take similar or even stricter measures. This is especially true for Canadian banks that have large deposits and operations overseas.

Zelmer writes, "The risk of such behavior is more acute today. International cooperation is harder, especially with the United States."

Canada’s "Big Six" banks—Royal Bank of Canada, Toronto-Dominion Bank, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, and National Bank of Canada—have strong ties in the U.S. For banks like BMO and TD, their U.S. operations sometimes match the size of their Canadian business in both assets and revenue. This closeness may allow foreign regulators to restrict capital in a crisis. This would make bank runs and financial shocks harder to manage.

Recommendations to Mitigate Risk

Zelmer advises banks and insurers in Canada to keep more surplus capital and liquidity at home. While this may cost more or pay lower tax benefits than investing offshore, it lowers the control that foreign regulators have during hard times.

He also asks for clearer public disclosure and more regulatory openness. Banks should share how their Canadian and overseas parts work together. Knowing this will help policymakers and market players see the risks of asset blocks by foreign authorities.

Zelmer explains, "If these investments sit in foreign systems or custody accounts, there is a risk they might be blocked or frozen." He warns that Canada’s biggest banks have large investments in foreign securities that also appear on their home balance sheets.

He stresses that even strong banks can suffer from bank runs. He mentions Home Capital Group, which faced liquidity issues in 2017. Zelmer calls on OSFI and other policymakers to watch bank practices closely. They must manage liquidity risk while thinking about the threat of foreign asset restrictions.

Ongoing Engagement with Canadian Banks

Zelmer notes that OSFI is in active talks with major banks across Canada. They discuss steps to face these new challenges. While details have not yet been finalized, regulators clearly see the risks that come from cross-border capital exposure. This understanding is vital given today’s uncertain global politics.

This report offers the views of an expert former regulator. It points out key vulnerabilities in Canada’s banking system as international relations worsen. The report calls for careful capital management and strong regulation to protect financial stability.

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Jobless Claims Drop to 218,000: A Silver Lining Amid Labor Market Concerns

Jobless Claims Drop to 218,000, Easing Labor Market Concerns

The U.S. labor market shows strength. Initial jobless claims fall. The number drops to 218,000 for the week ending September 20, 2025. This number beats expectations. Employers hold workers as hiring slows.

Key Highlights from the Report

• 218,000 claims go down by 14,000 from last week’s revised number.
• The number is well under the forecast of 235,000 from Dow Jones.
• Continuing claims, which track those collecting benefits, drop by 2,000 to 1.926 million.

Context and Implications

Data like this comes one week after the Fed cuts its benchmark rate by a quarter percentage point. The target now sits at 4.00%–4.25%. The Fed points out risks in employment. Slow nonfarm payroll growth and low job openings add to the concerns.

Yet, low jobless claims mean that companies do not plan to cut staff. In Texas, for example, unadjusted filings fall by nearly 7,000. ### Broader Economic Strength Amid Uncertainty

Other data shows strength in the economy:

• Q2 GDP grows by 3.8%, a half-point boost from previous estimates. Strong consumer spending helps this rise.
• Personal consumption, which drives a big part of the $30 trillion economy, increases by 2.5% from earlier levels.
• Spending on durable goods—like airplanes, appliances, and computers—rises 2.9% in August despite forecasts for a drop near 0.4%.

Orders for long-lasting goods, even when leaving out transportation and defense, rise. This signals strong demand.

Housing Market Shows Signs of Recovery

The housing market also stands strong:

• Sales of new homes jump 20.5% in August. This jump is the highest since January 2022.
• Existing home sales reach an annual rate of 4 million. This number tops expectations.

Federal Reserve’s Outlook

Fed Chair Jerome Powell speaks on an economy that holds steady against changes in trade, immigration, fiscal, regulatory, and geopolitical areas. He adds that monetary policy remains "modestly restrictive" with room for change.

Market watchers see two more rate cuts in 2025. These cuts may come in October and December meetings.

The latest data on jobless claims, GDP, and consumer spending points to a steady labor market and economy. Fed officials and investors will keep watching these numbers to guide future monetary policy decisions.

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Reviving the Dragon: How China’s Housing Stimulus Sparks Market Rally and Consumer Hope

China Housing Stimulus Bets Lift CSI 300 and Shanghai Composite

By Bob Mason, Published September 25, 2025

China stock markets get a boost. Investors sense that Beijing will soon use new help for the housing market. Housing stands as a key part of the country’s overall growth. On Thursday, September 25, 2025, mainland stocks rose strongly. The CSI 300 Index reached a level unseen since March 2022. The Shanghai Composite Index hit a 10-year high.

Housing Sector Struggles and Economic Impact

China’s housing market has faced hard times all year. These issues lower consumer hope. Real estate work dropped 12.9% from January to August. Residential housing area shrank by 4.7% during this time. Total home sales fell 7.3%. These numbers mark a steady fall that began earlier in the year.

Investor mood for real estate has dropped for five months now. Consumer confidence slipped to 87.9 in June, which is near the November 2022 low of 85.5. This trend slows spending and makes Beijing’s goal of a spending-led economy harder.

Calls for Policy Support

Huang Yiping from the People’s Bank of China urged officials to add fiscal help for the housing market. He spoke about the real estate sector and its weight on the overall economy. His clear words sparked hope among investors. They now expect that soon new measures will support housing. Recovery here may lift consumer hope and boost domestic buying.

The Consumption Challenge and Economic Indicators

Private spending makes up about 40% of China’s GDP. Falling external demand, hurt by US tariffs, now shifts focus to local buying. Retail sales grew 3.4% in August. This pace is slower than 3.7% in July and far behind the 6.4% seen in March. In the past, typical growth reached around 12.09%.

Exports slowed, growing only 4.4% in August after a 7.2% rise in July. These lower numbers put pressure on the government’s 5% GDP goal. They add weight to the need for new policy help.

Rising unemployment adds to the strain. The overall rate climbed to 5.3% in August from 5.2% in July. Youth unemployment reached 18.9%. These trends hurt spending and lower consumer hope.

Market Response and Outlook

The expected support has raised Chinese stocks. The CSI 300 Index now stands at 4,590. The Shanghai Composite has climbed to 3,900. These levels are high, and they mark strong gains. Year-to-date, the CSI 300 and Shanghai Composite have grown by 16.7% and 15.0% respectively, even under tariff pressures, a weak housing market, and soft demand.

Investors also see promise in high-tech fields like artificial intelligence and semiconductors. When compared with the 32.3% rise of the Hang Seng Index this year, mainland stocks seem more appealing.

Looking Ahead: Stimulus and Trade Dynamics

Focus now turns to Beijing and its next steps. Upcoming policy words will likely target help for the housing market and boost local spending. US–China trade talks also hold weight. The APEC Summit, set in South Korea from October 31 to November 1, will host key discussions. Talks may include tariff cuts and broader economic work. Such progress could support China’s recovery and steady stock gains.

For context, the CSI 300 once peaked at 5,931 in February 2021. The Shanghai Composite reached its all-time high of 6,124 in October 2007. Future private sector Purchasing Managers’ Index data for September will be watched for signs of what is next.

Conclusion

China’s housing market stays a key sign for the nation’s economic health. Calls for fiscal help and the rising stocks show clear hope. Policy moves may come soon to support and revive this important sector. A stronger housing market may spark consumer hope, raise local buying, and back steady growth amid many challenges.

For more real-time updates on China’s policy moves and stock trends, visit our economic calendar and market analysis sections.

About the Author:

Bob Mason has over 28 years of experience in the financial industry, covering currencies, commodities, alternative asset classes, and global equities, with a focus on European and Asian markets.

Sources: FX Empire, People’s Bank of China (PBoC), China National Bureau of Statistics

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Trump Administration’s Tariff Threat: A Looming Impact on Robotics and Medical Devices

Trump Administration Expands Tariff Investigations to Robotics and Medical Devices

Washington, D.C. – September 24, 2025 — The Trump administration steps up its trade policy. It starts national security probes into imports. The focus stays on robotics, industrial machinery, and key medical devices. The Department of Commerce announced the move on Wednesday. Tariffs may soon target sectors seen as needed for U.S. security. The change might raise costs for buyers, hospitals, and makers.

Broadening the Tariff Net Under Section 232

Under Section 232 of the Trade Expansion Act, probes began on September 2, 2025. The tests check if imports hurt U.S. security. The scan covers robotics and industrial machines. It covers protective gear like surgical masks, N95 respirators, and gloves. It covers consumable items such as syringes, needles, and drugs. It covers devices like wheelchairs, hospital beds, pacemakers, insulin pumps, and heart valves.

The Department of Commerce asks companies for facts. They request data on local production, demand trends, and links in foreign supply chains. Firms are also asked about the effect of foreign subsidies and trade issues.

Earlier Uses of Section 232 and Ongoing Investigations

This step builds on past uses of Section 232. The law was used before to tax cars, auto parts, copper, steel, and aluminum. Other probes inspect imports of drugs, semiconductors, and chip parts. The approach shows worries about over-reliance on foreign parts for key tech.

Trade Implications and Industry Impact

Data from the U.S. International Trade Commission shows heavy machinery imports from Mexico and China. In 2023, these imports made up more than 35% combined. The auto sector may face hard times since it depends on industrial robots. Most robots come from abroad because U.S. production stays low. In 2024, the sector installed 13,747 industrial robots, proving its need for imports.

The medical field may see price hikes on needed devices and protective gear. Some industry leaders worry that higher prices might harm care quality. Scott Whitaker, CEO of AdvaMed, a group for medical technology makers, said:
"MedTech supply chain leaders voice their fears. Higher tariffs may push up costs. This may affect programs like Medicare, Medicaid, and the Veterans Health Administration."

Rick Pollack, CEO of the American Hospital Association, warned that delays in imported medical gear might hurt patient care.

Trade Complexity Amid Existing Tariffs and International Agreements

If new tariffs come, they add to tariffs set by earlier policies. The European Union and Japan have made deals to avoid extra charges on their exports to the U.S.

These investigations show the administration’s plan to boost home production and reduce reliance on foreign parts. The effects on markets and buyers remain a hot topic.

This report changes as the Department of Commerce gathers more input from people and companies. Stakeholders, hospitals, and firms should watch for news on trade, prices, and supply lines.

— Reported by Anniek Bao, CNBC

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Unlocking Economic Potential: U.S. Latino Immigrants Contribute $1.6 Trillion to GDP and Drive Growth in Key Industries

U.S. Latino Immigrants Drive $1.6 Trillion in GDP, Report Reveals

In a study by the Latino Donor Collaborative, U.S. Latino immigrants produced a GDP of $1.6 trillion in 2023. The analysis shows Latino immigrants boost the U.S. economy.

Key Economic Contributions and Growth

Latino GDP grew by 50% from 2015 to 2023. Non-Latino GDP grew by 17% during the same years. Rising education, more business start-ups, and increased work ties help this rise.

  • Latino purchasing power climbed to $4.1 trillion.
  • California led with $989 billion in Latino GDP in 2023. The state is set to pass $1 trillion by 2025.
  • Texas, Florida, and New York also added many billions of dollars in Latino GDP.

The Rising Power of Latino Consumers

As baby boomers spend 4% less each year, Latino households fill the gap. Their spending grows over 3% each year. This rate nearly doubles that of non-Latino households. Economists see Latino buyers as a strong force in U.S. growth. Many companies now design plans to reach them.

Companies Benefiting from Latino Market Focus

Several major brands have grown by connecting with Latino consumers:

  • Modelo became America’s top-selling beer in 2023 by capturing 50% of the Latino market before Michelob Ultra took the top spot.
  • T-Mobile grew more than AT&T and Verizon by reaching more Latino customers.
  • Dr. Pepper doubled its share of Latino buyers in ten years and now follows Coca-Cola while staying ahead of Pepsi.
  • The WNBA earned its highest growth in Latino viewership among professional sports.
  • Kia jumped from 11th to 6th in new car sales as Hispanic market purchases increased by 44.5% in five years.

Economic Risks of Mass Deportations

Some experts warn that plans to remove undocumented immigrants may slow this growth. Dennis Hoffman, an economics professor at Arizona State University and lead author of the report, sees a risk in deporting up to 8.3 million undocumented workers. He links this move to risks for over 19.5 million jobs because of the drop in overall economic work. Hoffman explains that such removals may cut U.S. GDP by $2.3 trillion—a fall of 7.7%. This drop would put at risk many businesses and communities that depend on Latino work. He calls for system changes that mix firm rules with safe paths for work. He states, “Our system is fixable. We can support workers and avoid the heavy cost of mass removals.”

Conclusion

Latino immigrants fill a strong role in the U.S. economy by adding trillions to GDP and shaping how people buy goods. Businesses and policy makers must see the power of Latino communities. Their influence helps keep the country growing and paves the way for a sound future.

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Fed Chair Powell Signals Caution as Stock Prices Hit Elevated Levels

Federal Reserve Chair Jerome Powell Flags High Stock Valuations

September 23, 2025 — Providence, Rhode Island

Powell speaks and shows concern. He points to asset prices that many now call high. After a meeting of the Fed’s open market committee, he talks with reporters. Markets face shifts in rates and growth. Each word sits close to the next, clear in its link.

Powell’s Remarks on Financial Conditions and Market Valuations

Powell tests the market. He checks overall financial conditions. He asks if each policy moves conditions as he wishes. His words follow a simple link:

"We do look at overall financial conditions, and we ask ourselves whether our policies are affecting financial conditions in a way that is what we’re trying to achieve."

He adds that many measures show stock prices at high levels:

“But you’re right, by many measures, for example, equity prices are fairly highly valued."

Each word ties closely to the next to keep meaning clear.

Implications for Investors and Market Watchers

Powell’s tone stays cautious. His words signal that while hope shows in the market, stock prices may not mirror the real economy. High prices might push volatility and risk if change comes fast.

Investors and those who watch markets may see his phrase as a sign. Policymakers keep all links in check, watching market shifts closely.

Context: The Fed’s Balance Between Growth and Stability

The Fed must keep jobs up and prices under watch. Powell’s view shows the task: support growth by careful steps while stopping risk from rising. Each policy word connects closely to another—keeping ideas tight and clear. Market watchers sit close to Fed words to catch hints on moves in rates or other tools.

Summary of Key Points

  • Fed Chair Powell notes that many stock prices appear “fairly highly valued” by several counts.
  • The Fed checks all parts of financial conditions when it tests the impact of its actions.
  • High stock prices may bring risk if the market shifts quickly.
  • Powell’s clear words show the Fed’s work to keep markets in balance while aiding growth.

Investors and analysts, keep your ears near Fed talks. Each new word may help shape how markets move in the days to come.

This is a developing story. Please stay tuned for updates.

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OECD Upgrades Growth Forecasts: U.S. Economy Shows Resilience Amid Tariff Challenges

OECD Raises U.S. and Global Economic Growth Forecasts Amid Stronger-Than-Expected Performance

The OECD has raised its economic growth numbers for the U.S. and for world markets. It sees strong work by key markets in early 2025. This change shows a more positive view than before. Ongoing trade disputes and higher tariffs still add strain.

Stronger Global Growth Forecasts

In its report on Tuesday, the OECD raised its global GDP growth stake to 3.2% for 2025. This is more than the 2.9% listed in June. The group now expects a slight dip next year, keeping a 2.9% rate for 2026. For context, global growth hit 3.3% in 2024. The report links this rise to improved work in many world markets. The OECD said that growth stayed strong through early 2025. It pointed to steady industrial work and active trade, even as political issues stay.

U.S. Growth Outlook Improved

U.S. growth forecasts also went up. The OECD now sees a 1.8% rise in U.S. GDP for 2025, up from 1.6% in June. Still, this is lower than 2024’s 2.8% rate. The rate for 2026 is set at 1.5%.

The growth boost comes from:
• Big investments in AI tech
• Support from sound fiscal plans
• Steady work by consumers and workers

Trade and Tariff Impacts Still Loom

The report warns of many risks. New tariffs, which started in August 2025, have not shown all their effects. The U.S. set high fees, with an average of 19.5%, a rate not seen since 1933. These tariffs hit many imports, with some fees at 50%.

The OECD noted that companies have cut costs by lowering profits. Still, these rising fees now affect:
• What consumers pay
• Company buy decisions
• Worker job conditions

In several regions, labor trends show softer work markets. Unemployment is up and job offers fall. Unclear trade policies also slow down investments and trade flows.

Inflation and Market Risks

The organization now sees headline inflation in G20 nations at 3.4% for 2025. This is a small drop from 3.6% in June. In the U.S., the inflation rate was trimmed to 2.7% from 3.2%.

But risks stay that might change these numbers:
• More tariff hikes may come
• Rising price pressures might appear
• Some nations face hard fiscal times
• Financial markets, including crypto links, may waver

Potential Upsides

Two opportunities may push growth even further:
• Fewer trade limits could clear up uncertainties and boost trade
• Faster AI tech work may add to productivity and new ideas

Summary

The OECD’s new view shows a strong start in global markets during early 2025. Emerging markets and tech investments in the U.S. have worked well. Trade problems and tariffs still pose risks. Yet, easing limits and rapid tech work may help keep growth steady in the years to come.

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Navigating Turbulent Waters: China’s Labor Market Challenges and Economic Future

China Labor Market Struggles Deepen, Clouding Economic Outlook

By Bob Mason, Published September 23, 2025, 03:58 GMT

China’s labor market shows clear struggles. Beijing set a 5% GDP goal this year, but weak export demand, low prices, and rising unemployment pull the economy down. The close links among these issues make it hard for China to switch to a consumption-led model.

Rising Unemployment and Weak Demand

The latest data for August show China’s unemployment rate at 5.3%, just above July’s 5.2%. Youth unemployment now sits at 18.9%, the highest since December 2023. This high rate adds stress for new graduates and young workers who face a tight job market.
Exports from China drop as trade tensions make deals hard. Price wars in the domestic market squeeze profit margins, and companies must cut jobs to save money. Fewer jobs mean consumers spend less. Retail sales in August grew by 3.4% year-on-year, down from 3.7% in July and 4.8% in June. Smaller growth shows that workers worry about their jobs.

Impact of US Policies on China’s Labor Market

US rules now bar some Chinese workers from the American job market. President Trump raised the H-1B visa fee to $100,000 to limit visitors with skills. This change may cut demand for Chinese talent at a time when over 12 million new graduates look for work.
These shifts have led to a drop in consumer confidence. The confidence index fell to 87.9 at the end of Q1 2025, while the long-term average is 108.95. With more doubt about future jobs, private spending slows, which puts more strain on Beijing’s plans to boost domestic demand.

Challenges for Policy Makers and Market Response

Policymakers now face a loop where weak jobs lead to low spending, which then pressures company profits and lowers jobs even more. The housing market also suffers, and global change adds to worries over steady growth.
The People’s Bank of China (PBoC) kept loan rates at 3% for one-year loans and 3.5% for five-year loans. This move shows a careful balance between pushing for growth and keeping finance stable. Bank leaders seem to wait for US–China trade talks to finish before they change policies further.

After talks between President Xi Jinping and President Trump on September 19, many see a chance for trade ease before the Asia-Pacific Economic Cooperation (APEC) Summit. Trump also stopped $400 million in military aid to Taiwan. Some see this as a sign that trade talks may move ahead.

Market Reactions and Outlook

Financial markets now show mixed signs. The CSI 300 and the Shanghai Composite dropped slightly by 0.01% and 1.67% respectively this month, even though both have risen by more than 13% year-to-date. In contrast, Hong Kong’s Hang Seng Index climbed 4.3% in September.
Market experts warn that without more policy help—especially support for the housing sector and more trade break—stocks in China may drop more. Key problems stay, such as US tariffs, a weak labor market, and low export demand.

The Road Ahead: APEC Summit and Economic Prospects

The APEC Summit in South Korea from October 31 to November 1 becomes more important as both Presidents Xi and Trump plan to attend. Many hope the meeting will help ease trade problems between the US and China. Still, experts think that some tariffs will stay, and the global economy must work with them.
Alicia Garcia Herrero, Chief Economist at Natixis Asia Pacific, notes that China has two sides: progress in IT and semiconductors, and struggles in the large real estate market. She points out that limits on Chinese imports—such as the ban on some Nvidia GPUs—may change supply chains further.
Data from the private sector Purchasing Managers’ Index (PMI) in September, due next week, will help guide views on the economic future. If export and job cuts continue, market hope may fall even more. If prices steady and domestic demand picks up, some worries might fade.

Conclusion

China’s job market gets tougher as US trade issues continue, and the economic outlook grows dimmer. As more people lose jobs and worry about spending, Beijing must find strong actions that work. The coming APEC meeting and talk between the US and China will draw much attention as any progress might help bring back trust and guide China toward its growth targets.

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