Global Weekly Economic Update: Insights from Deloitte’s Latest Analysis
By Smart Money Mindset
The week of August 18, 2025, brings critical insights into the state of the global economy, as analyzed by Deloitte’s Global Economics Research Center. This week’s update highlights significant developments in China’s economic landscape, shifts in United States policy toward China, and pivotal debates surrounding US Federal Reserve monetary strategies. Below, we delve into the major findings and implications of this comprehensive economic outlook.
China’s Economy Faces Multiple Challenges Amid Continued Headwinds
Recent economic data from China indicates ongoing struggles fueled by external trade restrictions and domestic market weaknesses. The consequences of US-imposed trade controls, initially aimed at limiting China’s access to advanced technologies, are becoming increasingly apparent in China’s economic performance metrics.
Key Economic Indicators for July 2025:
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Retail Sales: China’s retail sales growth decelerated to 3.7% year-over-year—the slowest rate since December 2024. Month-over-month sales even dipped by 0.14%. While household appliances and audio/visual equipment sales surged by 28.7% year-over-year due to government subsidy programs, this momentum is expected to wane as funding for such programs dwindles. Conversely, automobile sales contracted by 1.5%, signaling tepid consumer demand.
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Industrial Production: Industrial output rose by 5.7% compared to the previous year, marking its slowest expansion since November 2024. High temperatures and flooding in some areas reportedly constrained production. Manufacturing output showed robust growth, especially in automotive (8.5%) and computing/communication equipment (10.2%), driven mainly by exports. However, utility and mining sectors grew at more modest rates. Notably, exports to the US declined sharply, hinting at potential overcapacity and deflationary pressures.
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Fixed Asset Investment: Investment growth remained subdued, with only a 1.6% increase over the first seven months of 2025. Property investment suffered a steep 12% decline, with new home sales dropping 4%. Some recovery was noted in infrastructure (+3.2%) and manufacturing investment (+6.2%), but overall, fixed asset investment dropped 0.6% from June to July.
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Inflation: Consumer price inflation stood at 0.0% year-over-year in July, a return to near-zero inflation. Food prices declined by 1.6%, while core inflation—excluding food and energy—was a meager 0.8%, reflecting weak domestic demand. Producer prices declined by 3.6%, maintaining a two-year low due to low demand and excess capacity.
To combat sluggish consumer activity, senior Chinese officials have advocated easing property and other restrictions, touting the strategy of “letting the rich spend” to buoy aggregate demand and employment. Select cities have begun loosening housing market restrictions to stimulate economic activity.
United States Policy Shift Toward China: A New Approach on Tech Exports
US-China economic and trade relations have long been focal points of global economic discussions. Historically, bipartisan US administrations have restricted exports of critical technologies—especially advanced semiconductors and manufacturing equipment—to prevent China’s military and technological advancements.
However, under the second Trump Administration, this stance is evolving. The US government is now permitting certain high-tech exports to China, provided the exporting firms pay a licensing fee. The administration argues that downgrading the technology in these exports prevents China from acquiring the most advanced capabilities while boosting US tech export revenues.
Critics, including Republican House leaders responsible for China policy, warn that this adjustment may inadvertently enhance China’s AI and military capabilities. They stress that export controls must remain a key national security defense.
Simultaneously, the US continues to advocate for companies to reduce dependency on China—known as “de-risking”—by investing in neighboring Asian economies. However, US tariffs on Asian countries complicate this initiative. High tariffs are fostering stronger economic and political ties between these nations and China, while curbing potential for US-oriented investment shifts.
Foreign direct investment (FDI) in China has sharply declined in response to these pressures. In Q2 2025, FDI inflows were $8.7 billion—less than 10% of their peak in Q1 2022—underscoring economic recalibrations in the region.
Additional Noteworthy Economic Themes
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Debate on Federal Reserve Policy: The US Federal Reserve faces ongoing discussions about managing inflation and the broader monetary policy stance, especially as underlying inflation rates show signs of acceleration despite headline indicators.
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Global Economics in Focus: Deloitte Insights continues to monitor regional economic developments across Africa, the Middle East, Asia-Pacific, Europe, and the Western Hemisphere, offering granular research on consumer spending, labor markets, inflation trends, and fiscal policy adjustments.
About Deloitte Insights and Economic Research
Deloitte Insights delivers rigorous and proprietary economic research designed to translate organizational aspirations into actionable strategies. Their resources span a vast array of industries and topics from technology and workforce trends to environmental, social, and governance issues. Their Global Economics Research Center remains a leading voice in analyzing international trade, market dynamics, and fiscal policy.
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For further insights or inquiries, contact Ira Kalish, Chief Global Economist at Deloitte Touche Tohmatsu, via [email protected].
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