Global Weekly Economic Update: Insights from Deloitte
Week of August 18, 2025
Deloitte Insights has released its latest Global Weekly Economic Update, providing a detailed analysis of current economic trends and issues shaping the global landscape. The report, contributed by Chief Global Economist Ira Kalish and the Deloitte Global Economics Research Center, focuses on economic developments, particularly regarding China and the United States, and their impacts on the global economy.
China’s Economy Faces Persistent Challenges
Recent data from July 2025 indicates that China’s economy is confronting significant headwinds, primarily due to ongoing trade restrictions imposed by the United States and a continued slump in the residential property market.
Consumer Spending Outlook
Retail sales in China grew by a modest 3.7% year-over-year in July, marking the slowest pace since December 2024. On a month-to-month basis, sales slightly declined by 0.14%. While sales of household appliances and audio/visual equipment surged by 28.7%, buoyed by government trade-in subsidies that are now waning, automobile sales fell by 1.5% compared to the previous year. This mixed picture underscores a cautious consumer environment, with calls from Chinese officials to ease property and market restrictions as a potential means to stimulate affluent consumer spending and overall demand.
Industrial and Investment Trends
Industrial production showed a 5.7% increase year-over-year, the slowest since late 2024, with government reports highlighting disruption due to extreme weather events like heatwaves and flooding. Manufacturing growth remained relatively strong at 7.4%, driven by sectors such as automotive (+8.5%), computer and communications equipment (+10.2%), and railway & shipbuilding (+13.7%). However, the prevalence of subdued domestic demand alongside growing exports—especially outside of the US market—signals risks of excess capacity and potential deflationary pressure.
Fixed asset investment grew by a mere 1.6% over the first seven months of 2025. The property sector continued to drag with a 12% decline in investment and a 4% drop in new home sales by floor area. Meanwhile, infrastructure and manufacturing investments partially offset this decline, increasing by 3.2% and 6.2% respectively. Monthly data reflects some contraction with a 0.6% drop from June to July.
Inflation Landscape
Inflation pressures in China remain muted. Consumer prices were flat year-over-year in July 2025, despite a slight 0.4% rise from the previous month. Food prices declined by 1.6%, while core inflation—excluding volatile food and energy sectors—rose by only 0.8%, signaling subdued underlying price pressures. Meanwhile, producer prices decreased by 3.6% annually, consistent with June 2025 figures, reflecting excess supply and weak demand.
Shifts in U.S.-China Economic Relations
The United States has historically restricted exports of advanced technologies to China, aiming to curb China’s military advancements and maintain geopolitical dominance. This posture had bipartisan support and spanned the administrations of President Trump and President Biden alike.
However, the current Trump administration has altered course by permitting certain high-tech exports to China, conditional upon export companies paying licensing fees to the U.S. government. While officials contend that these restrictions still prevent the transfer of the most advanced technologies, critics warn this approach may inadvertently strengthen China’s military technology, particularly in artificial intelligence. The Republican chair of the House China Committee emphasized that export controls remain critical to national security and cautioned against setting precedents that relax these controls.
Simultaneously, U.S. tariffs on various East Asian countries are complicating efforts to encourage companies to diversify away from China. Elevated tariffs have deepened these countries’ economic ties with China while dampening foreign direct investment into China itself. In the second quarter of 2025, foreign direct investment into China declined sharply to $8.7 billion—less than 10% of the Q1 2022 peak.
Broader Implications
This economic update underscores the complex interplay between geopolitical strategies and economic realities. China’s economy shows signs of slowing momentum amid internal market challenges and external trade tensions, while the United States navigates a nuanced policy shift reflecting competing priorities of economic engagement and national security.
For business leaders, policymakers, and investors, Deloitte Insights offers vital, data-driven perspectives to help navigate this evolving global economic environment. Continuing to monitor developments in consumer activity, industrial output, inflation, and international trade policy remains essential for anticipating future market dynamics.
About Deloitte Insights
Deloitte Insights provides proprietary research and expert analysis designed to empower organizations worldwide. Covering topics from economic policy and globalization to technology trends and workforce strategies, Deloitte’s research centers deliver actionable insights essential for decision-making in a disrupted, boundaryless age.
For ongoing updates and personalized content, visit the My Deloitte Dashboard or subscribe to Deloitte’s newsletters and webcast series, which also offer opportunities to earn CPE credits.
For further information or inquiries, contact Ira Kalish, Chief Global Economist at Deloitte Touche Tohmatsu Ltd., at [email protected].
Stay informed on the latest economic trends with Deloitte Insights.