A Turning Point: When the Global Growth Engine Stalls

The second quarter of 2025 marked a pivotal shift in the global macroeconomic landscape. While the United States—the world’s largest economy—posted a sharp decline in economic surprises, other major markets delivered upside surprises across the board. According to Citi’s Economic Surprise Index, which tracks the deviation of actual macroeconomic data from market forecasts, the U.S. dropped dramatically from +22.1 in Q4 2024 to -8.7 in Q2 2025. Meanwhile, regions like China, the U.K., Europe, and broader Asia-Pacific soared. This isn’t just a change in data—it’s a change in narrative.

The U.S. Falters: From Outperformance to Underdelivery

Nowhere was the shift more dramatic than in the United States. After finishing 2024 with one of the highest surprise readings globally (+22.1), Q2 2025 marked a reversal, plunging into negative territory with a reading of -8.7. The implications are clear: expectations were too optimistic, and the actual results—across employment, inflation, and consumption—fell short.

For markets, this spells recalibration. Bond yields may ease, the dollar could face downward pressure, and the Fed’s monetary stance might become more cautious. More broadly, it questions the narrative of American exceptionalism that dominated financial commentary over the past year.

Asia Steps Into the Spotlight: China and APAC Lead the Way

While the U.S. stumbled, Asia delivered. China, the world’s second-largest economy, surged from +3.3 to +32.5, signaling stronger domestic demand, export resilience, or possibly the effects of targeted stimulus measures.

The broader Asia-Pacific region (APAC) topped the global surprise rankings with a stunning +40.9, rebounding from a negative reading of -7.6 in the prior quarter. Even Japan, which had previously disappointed with -24.6, managed to climb back into positive territory at +3.7. For investors, this reinforces a trend: Asia is once again becoming the global growth engine.

Europe and the U.K. Rebound Against the Odds

Another surprise came from Europe. The U.K. showed one of the most dramatic turnarounds, jumping from -20.5 to +31.4, suggesting a strong recovery in economic activity and easing inflationary pressures. The eurozone also improved sharply, from -10.8 to +12.7.

After months of stagnation, energy concerns, and geopolitical tension, European economies seem to be regaining momentum. This shift could reignite institutional interest in European assets—particularly in consumer goods, banking, and green infrastructure sectors.

The Outliers: Australia, LATAM, and CEEMEA Underwhelm

Not all regions followed the global improvement trend:

Australia fell from +16.5 to -7.0, likely due to a cooling housing market and weaker household spending.

Latin America showed a decline from +13.9 to +5.3, reflecting slower momentum after a strong 2024.

CEEMEA (Central and Eastern Europe, Middle East & Africa) remained in negative territory, albeit with a slight improvement from -13.8 to -3.2.

These regions face a combination of structural risks, political instability, and commodity-driven volatility that continue to weigh on surprise potential.

The Big Picture: U.S. Loses Leadership as Global Momentum Shifts

The takeaway from this data is stark: the U.S. is no longer the sole engine of global surprise-driven growth. What we’re seeing is a recalibration of expectations and realities. While Wall Street had priced in continued American resilience, the hard data suggests moderation—and in contrast, global economies are surprising to the upside.

Whether it’s driven by late-cycle policy easing, stronger-than-expected consumer demand, or better fiscal execution, this shift in economic dynamics may shape capital flows, currency trends, and central bank actions in the months ahead.

What’s Next? Positioning for H2 2025

With the first half of 2025 in the rearview mirror, investors must ask: Will this divergence in surprises persist? Can the U.S. recover its momentum, or is this the beginning of a broader regime change where Asia and Europe drive the next phase of growth?

Future data—on manufacturing, services, labor markets, and inflation—will be critical in shaping expectations. But one thing is clear: the global economy is realigning, and market participants would do well to watch the East and the Old Continent just as closely as they do the U.S.