Global Weekly Economic Update: Insights from Deloitte’s Latest Report
Week of August 4, 2025
Deloitte Insights continues to provide comprehensive and timely analysis on global economic trends, helping organizations transform aspirations into actionable strategies. The latest weekly update, authored by Ira Kalish, Chief Global Economist at Deloitte Touche Tohmatsu Ltd., focuses on the evolving economic landscape in the United States, global trade developments, and the impact of tariffs.
U.S. Economy Signals a Slowdown
Recent data from the U.S. government, particularly the employment report for July 2025, indicates signs of an economic slowdown. The employment report is based on two key surveys: a household survey capturing self-employment and labor force participation, and an establishment survey tracking job creation across sectors.
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Labor Force and Employment: The household survey noted a shrinking labor force and a decrease in employment, which contributed to the unemployment rate rising slightly from 4.1% in June to 4.2% in July. Despite this, the unemployment rate remains stable compared to the previous year, a factor partly attributed to a significant reduction in immigration.
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Job Creation Trends: The establishment survey revealed the creation of 73,000 new jobs in July, with all growth rooted in healthcare and social assistance sectors. Excluding these, job growth was essentially flat, with declines reported in mining, manufacturing, information, professional and business services, and government sectors. Downward revisions were made to job growth figures for May and June, indicating a three-month total of only 106,000 new jobs compared to 380,000 in the previous quarter.
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Wages and Compensation: Despite the slowdown in job growth, average hourly earnings increased by 3.9% year-over-year, the highest since March 2025. The persistent wage growth amidst weak demand is partly due to labor market tightness, influenced by lower immigration levels. Real wages currently outpace inflation, enhancing workers’ purchasing power; however, this balance is sensitive to potential inflationary pressures from tariffs.
Following the employment report, U.S. equity markets dropped noticeably, accompanied by a decline in the U.S. dollar’s value against the euro and Japanese yen. The 10-year U.S. Treasury yield also fell as investors adjusted expectations, now assigning a 42% probability to a scenario involving three Federal Reserve interest rate cuts by year-end — a significant jump from 8% the previous day.
Q2 2025 GDP Growth Reflects Mixed Signals
The Bureau of Economic Analysis reported that U.S. real GDP grew at an annualized rate of 3% in Q2 2025, rebounding from a 0.5% contraction in Q1. However, the apparent strength of the headline figure masks underlying weaknesses in domestic demand.
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Consumer Spending: Growth was modest at 1.4%, driven by a 3.7% rise in durable goods purchases, likely due to consumers accelerating purchases ahead of tariff implementation. Spending on nondurables and services grew at a slower pace.
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Business Investment: Overall, nonresidential fixed investment grew by a mere 1.9%. Investment in structures plummeted by 10.9%, suggesting companies are postponing or cancelling major infrastructure projects amidst tariff-related uncertainty. Investments in equipment and intellectual property fared better, increasing by 4.8% and 6.4%, respectively. Residential investment continued its decline, falling by 4.6% during the quarter.
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Trade Dynamics: Trade flows heavily influenced GDP outcomes. Real exports of goods declined by 5%, while services exports increased by 4.4%. Real imports of goods fell sharply by 35.3%, a reversal from a 51.6% increase in Q1 and a primary driver adding 5 percentage points to GDP growth. Exports and imports of services also decreased modestly.
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Government Spending: Government purchases increased only marginally by 0.4%, with a steep 11.2% drop in federal nondefense spending, offset by gains in defense and state/local governmental expenditures.
Excluding trade effects, real final domestic sales grew by just 1.1%, reflecting subdued underlying economic activity.
Trade Developments and Tariff Impact
Trade dynamics remain a central theme for the U.S. and global economies. Recent developments include:
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U.S.-EU Trade Agreement: The United States and the European Union have reached a trade agreement aimed at easing some tensions and creating more stable trading conditions.
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New Tariffs Announced: Despite progress with the EU, the U.S. has announced new tariffs targeting a number of other countries. The effective average tariff rate currently imposed by the United States hovers around 1%, with potential to increase if further trade tensions escalate.
The combined effects of tariffs present uncertainty for businesses, prompting caution and delays in investments, especially in supply chain and infrastructure projects. The extent to which tariffs translate into increased consumer prices remains a key concern, as inflationary pressures could erode real income gains.
Looking Ahead
Deloitte economists emphasize the need to monitor several critical factors:
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The trajectory of job creation and wage growth in the context of changing demographic trends, including immigration levels.
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How trade agreements and tariffs continue to affect business investment decisions and consumer behavior.
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Inflation trends influenced by tariffs and other supply chain considerations.
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Monetary policy responses by the Federal Reserve amid a slowing economy and fluctuating labor market conditions.
For businesses and policymakers alike, insights and data from sources such as Deloitte’s Global Economics Research Center provide valuable guidance amid a complex and rapidly shifting economic environment.
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Author: Deloitte Global Economics Research Center
Contact: [email protected]
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