Global Economic Report - Australia, China & US - August 2025

In 2025, the three economic heavyweights of the Asia-Pacific and beyond — Australia, China, and the United States — are moving along very different paths. Understanding these trajectories is not just an academic exercise; for professionals in trade, investment, and supply chains, these shifts shape the environment in which decisions are made every day.

Australia

Australia’s economic story this year is one of measured slowdown rather than crisis. The Reserve Bank of Australia (RBA) has begun gently easing interest rates — from 3.85% to 3.60% in August, a confident signal that inflation is under control for the first time in years. Headline inflation is now 2.1%, sitting comfortably within the RBA’s 2–3% target band, while core inflation has edged down to 2.7%. Yet, beneath the calm, growth is sluggish. Quarterly GDP growth slowed to 0.2%, annual growth to 1.3%, and both manufacturing and mining are contracting. 

The labour market is softening, with unemployment rising to 4.3% and youth unemployment above 10%. Still, wage growth of 3.4% and a robust participation rate of 67.1% suggest that the economy is adjusting, not unravelling. On the trade front, June’s AUD 5.3 billion surplus was a standout, driven by a rebound in exports and reduced imports. But the terms of trade are falling, hinting at lower prices for key exports. Businesses see opportunity in moderating inflation, the key will be in improving consumer confidence, and signs of expansion in both services and manufacturing PMIs. 

The focus for Australian businesses should be towards productivity, technology investment, and risk-proofing supply chains against geopolitical and logistical shocks.

China

China’s data tells a more fragile story. The economy is facing deflationary pressures. July’s inflation was flat at 0%, and producer prices fell 3.6%. Consumer confidence is stuck at a low 88 points, and retail sales growth has slowed to 4.8% annually. The real estate sector, a core pillar of China’s growth model, remains under severe strain: property investment is down 11.2%, new home sales have plunged 24%, and housing starts are collapsing. Manufacturing PMIs are hovering around the break-even point, and business confidence is weak. Despite an official GDP growth rate of 5.2%, much of this expansion is state led rather than driven by vibrant private sector activity.

High government debt, at a record 88.3% of GDP constrains Beijing’s ability to unleash large-scale stimulus without creating longer-term instability. For the global supply chain, these pressures matter. China’s reduced commodity demand hits exporters like Australia, its price deflation puts pressure on global manufacturing margins, and its ongoing property crisis risks creating ripple effects through banking systems and global markets. At the same time, weakness in China is accelerating the “China-plus-one” sourcing strategy — a trend reshaping global production patterns toward Southeast Asia, India, and beyond.

United States

Across the Pacific, the US economy is showing resilient but uneven growth. Quarterly GDP rebounded to 3%, annual growth remains at 2%, and industrial production is still rising modestly. But the picture is split. Services are expanding strongly (PMI 55.7), while manufacturing is contracting (PMI 49.8). Inflation has cooled to 2.7%, but the Federal Reserve is keeping interest rates at 4.5%, signaling caution. The labour market is loosening. Unemployment has ticked up to 4.2%, yet wage growth of 3.9% keeps services inflation sticky. Housing is a clear weak spot, with falling permits, starts, and sales, while high mortgage rates deter buyers. There is every chance this situation could land on Australian shores, as housing is very much synced to employment, and if NZ is the canary, lowering rates do not guarantee economic recovery of lifting asset prices, at least not at this stage of the economic cycle.

Consumer spending in the US is still robust, but rising savings rates suggest households may be preparing for leaner times ahead. For global markets, US stability is critical. The US dollar’s strength impacts global trade costs, commodity prices, and capital flows. US technology and innovation remain essential to productivity worldwide, including in Australian and Asian supply chains. 2025’s economic landscape is a story of contrasts: Australia easing the brakes, China struggling to find momentum, and the US holding its ground.

For decision-makers, success lies in reading these crosscurrents and positioning supply chains, investments, and strategies to navigate not just one economy, but the interplay between all three.

Procurement & Supply Chain Impacts

Global economic signals are sending mixed messages for procurement leaders, with regional differences in demand, cost pressures, and supplier stability shaping sourcing strategies for the year ahead. Across key markets, opportunities exist to secure cost advantages and improve resilience, but risks demand proactive mitigation. 

Australia’s latest data points to a split landscape. Falling borrowing costs open the door for investments in warehouse automation, infrastructure upgrades, and strategic inventory builds. Consumer spending remains firm — retail sales rose 1.2% in June — sustaining demand in FMCG, retail, and services supply chains. PMI readings above 50 suggest pockets of short-term growth, and a rise in building approvals indicates potential for construction-material demand in 2026. However, GDP growth of just 0.2% for the quarter highlights soft conditions in industrial and export sectors.

Output declines in manufacturing (-2.5%) and mining (-3.2%) will pressure suppliers linked to these sectors. Skills shortages persist in logistics, trades, and specialist procurement roles, and falling terms of trade are eroding export margins. Strategic Priorities are surely to diversify away from resource-heavy supplier bases, secure freight, and energy contracts while prices are favourable, and increase domestic sourcing to reduce exposure to global disruptions. 

China’s 5.2% GDP growth headline hides deep-seated structural challenges. Deflation (0% CPI, -3.6% PPI) is squeezing supplier margins, consumer confidence sits at 88 points, and the property sector remains in steep contraction (-24% new home sales). Manufacturing PMIs hover at break-even, reflecting a fragile industrial base. 

For procurement, deflation can offer short-term buying power. Chinese suppliers may be more flexible on pricing, and underutilised capacity could shorten lead times. Weak domestic demand is also driving more producers to seek export contracts, increasing choice for international buyers. Yet risks are mounting. Financially stressed suppliers could fail without notice, property-sector strain could limit credit access for manufacturers, and foreign direct investment has fallen 15.2% year-on-year, signalling potential erosion in manufacturing capability.

Geopolitical tensions and trade restrictions further complicate compliance and sourcing. It seems a key pathway is to accelerate “China-plus-one” diversification into Southeast Asia, India, or nearshore hubs; intensify supplier financial health monitoring; and build redundancy into logistics networks for critical goods. 

The US economy continues to show resilience, with GDP growth supported by strong consumer demand and steady employment. Services PMI readings remain above 50, signalling expansion, and manufacturing activity has stabilised after earlier contractions. Infrastructure investment programs are driving demand in construction materials, transport, and heavy equipment supply chains.

However, inflationary pressures remain sticky, particularly in services and labour-intensive categories. Wage growth in logistics, warehousing, and specialist trades is adding cost pressure, and interest rates, while expected to ease in 2026, remain relatively high. Supply chain congestion risks are re-emerging in some US ports, driven by weather disruptions and labour disputes.

For US procurement professionals, locking in long-term supply contracts in high-demand sectors, explore automation and process efficiency to offset wage pressures, and diversify import entry points to reduce port congestion risk. The current mix of regional deflation (China) and easing borrowing costs (Australia) offers procurement teams a window to secure favourable contracts before conditions tighten. Supplier instability in China, demand softness in Australian industrial sectors, and cost pressures in the US could interact, creating cascading risks in multi-region supply chains.

Balancing short-term tactical gains (e.g., price concessions, capacity access) with long-term resilience measures (e.g., multi-source strategies, domestic capacity investment, logistics redundancy) maybe key. If you have any questions re the market relating to procurement or require assistance in recruiting for increased procurement focus to manage risk and improve ROCE, please just us a line. 

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