Take Two: Eurozone growth forecasts revised down; US government bond yields rise
- 26 May 2025 (3 min read)
What do you need to know?
The European Commission (EC) downgraded its Eurozone GDP growth forecast on the back of heightened policy uncertainty and trade tensions. It now expects the bloc’s economy to grow by 0.9% this year and 1.4% in 2026, revised down from its previous predictions of 1.3% and 1.6% respectively. The revision was largely attributed to a “weakening global trade outlook and higher trade policy uncertainty”. The EC also expects Eurozone headline inflation to slow to an average of 2.1% in 2025 and 1.7% in 2026 from 2.4% last year. Separately, Eurozone annual inflation was confirmed at 2.2% in April, matching March’s rate.
Around the world
Japan’s core inflation measure which excludes fresh food and energy rose to 3.0% in April, from 2.9% the month before. Headline inflation was unchanged at 3.6%. Meanwhile, business activity in Japan contracted in May according to a flash Purchasing Managers’ Index (PMI). The composite PMI, which covers both manufacturing and services, fell to 49.8 from 51.2 in April – a reading below 50 indicates a contraction. Elsewhere, China cut its benchmark lending rates for the first time since October, lowering the one-year and five-year loan prime rates by 10 basis points each.
Figure in focus: 5%
US 30-year government bond yields rose above 5% for the first time since October 2023 last week, as long-dated Treasuries sold off on concerns over government debt. The rise in yields follows Moody’s decision to downgrade the US’s credit rating by one notch from Aaa to Aa1 and came alongside the US administration’s plans to pass “One Big Beautiful Bill”, a fiscal package widely expected to raise the US’s already elevated deficit over the coming years to fund tax cuts. Moody’s expects the federal debt burden to rise to about 134% of GDP by 2035, from 98% in 2024.
Words of wisdom
Greenhushing: A practice where companies withhold information about their sustainability targets and credentials, often to avoid scrutiny. Organisations may choose not to publish environmental, social or governance (ESG) information for several reasons, including fears of being accused of greenwashing – overstating ESG credentials - or criticism if their sustainability efforts fall short of targets. Greenhushing may limit transparency and reduce or distort information available to the public and investors, making it more challenging to evaluate an organisation’s climate targets or assess its carbon emissions.
What's coming up?
On Tuesday, a raft of Eurozone economic sentiment surveys are issued. Minutes from the latest Federal Reserve monetary policy meeting are published on Wednesday – at its latest gathering policymakers opted to leave interest rates on hold at 4.25%-4.50%. A second estimate of US first quarter (Q1) GDP growth is published on Thursday, and Canada follows with its own Q1 economic growth update on Friday.
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