The First Global Economic Snapshot of 2025

We have our first global business surveys of 2025, and … things don’t look much different from 2024. That isn’t a negative for markets, as it implies the economic conditions supporting broad earnings growth remain in place. What was fine for stocks in 2024 should stay fine in 2025.

According to S&P Global’s flash purchasing managers’ indexes (PMIs), major Western economies grew in January, with the US expansion more broad-based than its transatlantic peers. (Exhibit 1) On a sector level, manufacturing improved in January—with fewer firms in Europe reporting contraction and US factories flipping to slight growth. (Readings over 50 indicate expansion.)

Exhibit 1: The Latest PMIs

Source: FactSet, as of 1/28/2025.

Anecdotal evidence suggests politics negatively affected some economic activity. Several UK respondents blamed last October’s Budget for higher staff costs—and lower employment—while France is still navigating “the political crisis that is economically paralysing the country” since last summer.^[i]

Not all is gloomy, though. In America, hope for “pro-growth” policies under the Trump administration buoyed business optimism.^[ii] Meanwhile, in Germany, some anticipate February elections will deliver political stability and US tariffs won’t be as onerous as first thought—boosting sentiment among those surveyed.^[iii]

Now, politics tends to lead headlines and provide an easy culprit for economic weakness. We saw as much last year: June 2024’s flash PMI reported British and French businesses blamed respective snap elections for an activity slowdown. Perhaps some firms do take a “wait-and-see” approach and delay decisions until political clarity arrives. But “political uncertainty” is also a useful—and simple—catch-all scapegoat for weak results, which may occur for myriad reasons (e.g., industry-level challenges or company-specific issues).

Moreover, elections tend to have a fleeting effect on activity. Eventually, businesses carry on. Despite last year’s high-profile votes, PMIs haven’t deviated much from their longer-running trends: Services (gold bars) have been mostly expansionary while manufacturing (green bars) has struggled (Exhibit 2)

Exhibit 2: Elections Don’t Swing Longer-Term Economic Trends

Source: FactSet, as of 1/28/2025. Manufacturing and services PMIs for the US, UK and France, May 2023 – January 2025.

Note, too, that while headline manufacturing PMIs remain weak, January’s preliminary estimates showed underlying signs of improvement. In the US, factory new orders rose after six months of contraction—pointing to future production.^[iv] The UK manufacturing sector’s contraction eased, and those reporting growth cited boosts from new product launches and successful marketing strategies—indicating some firms are going on offense.^[v] Even in much-maligned Germany, moods appear to be turning a corner as manufacturers’ confidence for future activity hit a near-three year high.^[vi]

As with any dataset, PMIs have limitations. These surveys reveal the breadth of growth (or contraction), not the magnitude. That means strong expansion by a minority of respondents could override mild contraction reported by the majority. Still, PMIs provide quick insight about recent economic conditions, and in our view, January’s numbers confirm a still-growing global developed economy.

These preliminary growthy figures are worth noting for investors. Consider how 2024 featured a modest global expansion and earnings growth despite high-profile weak pockets (see Germany’s mild contraction and the UK’s choppy growth). These soft patches are well-known and haven’t changed entering 2025, as American economic growth still looks firmer than Western Europe’s. But if last year’s environment was fine for corporate earnings—and therefore stocks—we don’t see a reason why markets can’t do well against a similar backdrop in 2025. Stocks don’t require rip-roaring economic expansion to rise. Modest, slow growth can be enough depending on where expectations are.