As global markets navigate policy shifts and inflationary pressures, Q2 2025 presents a crucial set of economic indicators for investors to closely monitor. These indicators will play a significant role in shaping the economic outlook. Below, we delve into these key metrics, supported by insights from leading research institutions and regulatory guidance.
1. GDP Growth: Moderating Momentum
Real GDP growth is projected to decelerate slightly in Q2, with forecasts ranging from 1.6% to 2.3% (annualized). While Q1 2025 matched 2024Q4’s 2.3% pace, higher tariffs, and policy uncertainty are expected to dampen growth to 1.9% by mid-Q2. The University of Michigan notes that rebuilding inventories and steady consumer spending will partially offset headwinds, but S&P Global warns that regressive policies (e.g., tariffs, workforce reductions) could exacerbate slowdowns.
2. Inflation: Persistent Pressures
The Fed’s preferred inflation gauge—core PCE—is forecast to rise to 2.7% in Q1 before easing to 2.2% by late Q2. However, new tariffs may push year-over-year inflation to 2.4%. Elevated goods prices remain a concern, particularly in the semiconductors and automotive sectors.
3. Unemployment Rate: Gradual Uptick
Unemployment is expected to rise from 4.0% in Q1 to 4.1% in Q2. S&P Global anticipates a peak of 4.6% by mid-2026, driven by public-sector hiring constraints. Monthly payroll gains will slow to 188,000 jobs in Q1 and Q2.
4. Interest Rates: Cautious Easing
The Federal Reserve is expected to implement one to two 25-basis-point rate cuts in 2025, with markets pricing in a June reduction. S&P Global predicts a year-end federal funds rate of 4.00–4.25%, while the University of Michigan foresees additional cuts in December.
5. Policy Uncertainty: A Wildcard
5. Policy Uncertainty: A Wildcard that Requires Caution rising policy volatility—particularly around tariffs and taxation—has dampened consumer sentiment despite strong wage growth. The Policy Uncertainty Index’s rapid escalation suggests prolonged market turbulence, though historical trends indicate potential rallies post-intervention. This uncertainty underscores the need for caution and preparedness in the face of potential market turbulence.
Disclosure
This article is for informational purposes only and does not constitute investment advice. The author is not a registered investment advisor, and readers should consult a financial professional before making decisions. Conflicts of interest: No compensation was received from entities mentioned herein. Data sources are cited below.
Sources
- Phillips & Company: https://phillipsandco.com/blog/what-lies-ahead-in-q2-2025/
- University of Michigan: https://lsa.umich.edu/content/dam/econ-assets/Econdocs/RSQE%20PDFs/RSQE_US_Forecast_Feb25.pdf
- S&P Global Ratings: https://www.spglobal.com/ratings/en/research/articles/250325-economic-outlook-u-s-q2-2025-losing-steam-amid-shifting-policies-13450076
- Duncan Williams Asset Management: https://www.dwassetmgmt.com/blog/key-economic-indicators-to-watch-in-q2-2025
David Scully
David Scully has over 20 years of experience in investment research and team management. As President, he oversees the company’s daily operations and implements its strategic objectives. David holds the Chartered Financial Analyst (CFA®) and Certified Financial Planner (CFP®) designation. A graduate of the University of Georgia with a bachelor’s degree in economics, David is a proud Memphis native deeply committed to his community. He actively contributes to numerous organizations, holding leadership positions such as: • President, Board of Directors, Wolf River Conservancy • President, Board of Directors, Memphis Botanic Garden • Treasurer, Board of Directors, Assisi Foundation • Vice President, Board of Directors, Economic Club of Memphis • Member, Boards of Directors, University of Memphis Foundation, St. Agnes Academy, and CBHS Alumni Board David also serves on the Greater Memphis Chamber of Commerce’s Chairman’s Circle and Small Business Council. Previously, he was Treasurer for the University of Memphis Research Foundation Board and remains an engaged Young Presidents’ Organization (YPO) member. Beyond his professional and civic endeavors, David values his role as a husband to Michelle and father to their two daughters, Ruthie and Mae Carter. He is an enthusiastic coach who supports his daughters in basketball, soccer, and softball. Faith and family are central to David’s life, and the Scully family are active members of St. Peter Church.
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