What we got right and wrong in 2025

This week we are marking our own homework – examining how our predictions this year have fared. (You can do your own marking by visiting our archive of briefings at: https://www.deloitte.com/uk/en/blogs/monday-briefing.html)

In January we thought 2025 would offer “more of the same”, with global activity of 3.2%, a similar pace to 2023 and 2024. That is pretty much what has happened. We thought that US growth would slow to about 2.0% from 2.8% but that it would continue to outperform other major western economies. That looks about right.

We were broadly on the money with trends in European growth, which is likely to come in at just over half the rate of the US this year. We predicted that Germany “is likely to show very modest growth this year.” That was an understatement. The German economy looks like to expand by just 0.2% this year, with GDP having contracted in the last three years. As expected, small and medium European nations like Ireland, Poland and Spain have outperformed the large western European economies this year.

In developing markets, the long-term decline in China’s growth rate has continued, albeit with a growth rate, at around 4.8%, that would be the envy of any western economy. We underestimated the momentum of Indian growth. The IMF now expects the Indian economy to expand by 6.6% this year, above our initial 6.0% estimate, and an impressive achievement considering the disruption to global trade.

We were right in thinking that the oil price would weaken in 2025. Tepid demand and an increase in output from OPEC+ countries have seen the oil price fall from a January peak of $82/barrel to $61/barrel.

UK growth this year is likely to come in around the 1.3% mark, marginally higher than our 1.1% forecast. But we got the profile of UK growth wrong. After near stagnation in the second half of 2024, we expected a weak start to 2025 with activity picking up through the year. Instead growth bounced back and the UK outpaced every other G7 economy in the first half of 2025, supported by US export demand designed to pre-empt tariffs. Growth has stalled since the middle of the year, not gathered pace as we had expected.

The new US government has proved more radical than we anticipated. We felt that the new administration would probably temporise and negotiate on tariffs, mitigating the eventual increase in tariff rates. The administration has proved willing to negotiate, but the scale of the increase in the average US tariff rate – from 2.5% to 17.0% – is much greater than we expected. The Trump administration has also moved faster than we anticipated on migration. The US government has deported over 600,000 people this year and claims that 1.9m unauthorised workers have left the country of their own volition. In November, the San Francisco Federal Reserve estimated that net migration to the US this year will fall to 515,000, down from 2.2m last year.

Nor did we expect Germany’s new, CDU-led government, to change the German constitution to allow for significantly higher levels of debt-financed spending on infrastructure and defence. The expected rise in public spending is one reason why most economists expect German growth to pick up this year.

In our briefing on energy in February we pointed out that demand for energy from new data centres was soaring. What we failed to anticipate was the speed of the increase in investment on technology and data centres. It now seems likely that well over half of all US growth this year will have come from tech-related investment. We should also have placed more weight on the risks to growth of a rising wave of cyber-attacks. The five-week closure at leading UK carmaker JLR, for instance, reduced September GDP by 0.17 percentage points, enough to depress growth for the whole of the third quarter by almost 0.1 percentage point.

We, along with most economists, were broadly correct in expecting 2025 to be a year of continuing, unspectacular global growth, with the US economy slowing and interest rates and inflation falling in most western economies. The scale of the rise in US tariffs caught us by surprise as did the way in which AI became a major driver of US growth. Those two big shocks, one negative and one positive, have perhaps cancelled each other out in terms of the short run impact on activity, leaving US growth performing as had been expected at the start of the year.

The surprises in the global economy in 2025 were less dramatic and immediately consequential than those of recent years. That made the big economic indicators – growth, inflation, rates and so on – easier to predict. Forecasting change elsewhere, in policy and the composition of activity, remained difficult.

Next week’s Monday Briefing is the last of this year. We’ll be back on 5 January with the results of our latest survey of UK CFOs and, on 12 January, with our view and forecasts on the world economy in 2026.