2025 Global Industrial "A Peculiar Rebound"

The global manufacturing sector in 2025 did not follow the script of “trade conflicts = industrial recession.” JPMorgan Chase breaks down the resilience of that year into several clues: Global industrial output (IP) rebounded after the sluggish 2022-2024 period, and during the peak of trade tensions, commodities outperformed services.

According to sources from Wind Trade Platform, Joseph Lupton of JPMorgan Chase’s Global Economics Research team stated in a report on the 24th that the industrial performance in 2025 “broke the historical close relationship with GDP.” This is the main “anomaly” the report aims to explain: why growth didn’t collapse, inventories didn’t drag down, and it wasn’t just technology supporting the recovery.

They attribute this to three variables: First, demand driven mainly by capital expenditures (especially equipment investment); second, the AI boom indeed boosted tech output, but more critically, non-tech sectors shifted from two years of contraction back to positive growth; third, inventories shifted from “drag” to “lean,” leaving room for future growth.

Looking ahead, the report’s outlook isn’t overly aggressive: with stable end demand, low inventories, and potential continued demand expansion, global industrial output could still grow at an annualized rate of 2%-3% in the coming months. But risks are two-sided—sustainable tech growth and labor market stagnation could suppress growth again; judicial changes related to tariffs are seen as unlikely to alter the main narrative of US trade conflicts.

The 2.4% growth in 2025 isn’t a sudden surge: a strong first quarter but no “hangover” in the second half

The report sets the tone for 2025 with a figure: global industrial output is projected to grow 2.4% quarter-over-quarter (QoQ) annualized. About 1.6 percentage points of this occurred in February-March, translating to a 9.4% annualized rate, which the report links to concerns over global trade conflicts prompting early production and procurement.

More notably, JPMorgan initially expected this “short-term stimulus” to cause stagnation in the second half of 2025, but the opposite happened: growth slowed but remained at an annualized rate of 1.7%. The report partly attributes this resilience to changes in inventory cycles—the pace of inventory reduction slowed in 2025, providing a buffer for output.

AI is an obvious driver, but 2025 resembles a “non-tech reacceleration”: from -0.8% to +1.2%

The strength of the tech sector is undisputed. The report states: excluding China, 2025 global tech output grew 9.1% year-over-year, faster than 4.7% in 2024, driven by AI enthusiasm and capital expenditures by hyperscale cloud providers.

However, the report emphasizes: after several years of tech strength, tech alone cannot explain the shift from “sluggishness” in 2022-2024 to “re-acceleration” in 2025. The more critical variable is that non-tech output returned to positive growth—excluding China, global non-tech output in 2025 grew 1.2% YoY, after two years of -0.8%. While not a high-growth figure, this change in direction is enough to reshape judgments about whether the industrial cycle is spreading.

Developed markets aren’t relying solely on auto recovery: US and Europe rebounded after Q1 but then stabilized, with a more “multi-point repair” structure

Regionally, the report sees the revival of manufacturing in developed economies (DM) as a main theme for 2025: after contracting 1.4% in 2024, DM manufacturing returned to +1.4% YoY in 2025. The most notable improvements are in the US and Eurozone: over the two years ending Q4 2024, US and Eurozone manufacturing output shrank at annualized rates of -0.9% and -2.9%, respectively; in 2025, they grew by 1.7% and 1.8%.

The report doesn’t shy away from the fact that “growth was concentrated in Q1 and then leveled off,” but emphasizes: the market’s previous concern of “front-loading and subsequent retracement” did not materialize.

At the industry level, autos are not the main driver of this recovery. The report notes: in developed markets, auto performance was relatively stagnant, with US auto manufacturing still notably weak (linked to trade conflict impacts). But the scope of recovery is broader than just “tech + pharma”: outside tech and pharma, aerospace and machinery also improved in the US; in the Eurozone, machinery and autos, among other sectors, rebounded from weakness in 2024. According to the report’s data, out of 20 major manufacturing IP categories in the US, 14 improved in 2025 compared to 2024; in the Eurozone, 9 out of 11 did.

Emerging markets: overall solid, but “Asia’s strength = tech strength,” with uneven performance

The report’s view on EM (Emerging Markets) is more “divided but stable”: EM commodity production still grew 3.8% YoY (slower than 4.6% in 2024), mainly driven by Asia, which’s strength is highly concentrated in tech.

Among the economies listed, Singapore (+25%) stands out with significant tech output growth, with tech constituting a larger share of manufacturing; it also experienced end-of-year pharmaceutical pre-production disruptions. Conversely, in regions where tech-driven growth is weaker and non-tech weights are higher, 2025 isn’t “bright”: manufacturing in South Korea and Thailand, measured QoQ/YoY, even contracted, linked to trade conflict drag.

Demand focus on capital expenditure: equipment investment lifts non-tech, but structural blind spots remain

The report views “rising end demand” as the foundation of the industrial rebound, highlighting capital expenditure (capex) as particularly notable. Global business equipment investment grew 6.5% YoY in Q3 2025, the fastest in three years; their capex nowcaster indicates about 4.4% annualized growth in Q4, tracking a monthly pace of around 6% into the current quarter.

A point often overlooked: the uptick in equipment investment isn’t limited to the US. The report’s tracking shows that, excluding the US and China, global equipment investment growth in the first three quarters of 2025 rose from 3.6% in 2024 to 5.9% annualized.

But the report admits: visibility is limited—whether the rise in non-tech output is mainly driven by non-tech capex outside the US or by inventory changes in non-tech goods is hard to disentangle. At least in the US, the acceleration in capex in 2025 is primarily tech-driven, with other categories more mixed; however, by year-end, signs of “more non-tech” demand, such as improved durable goods orders and shipments, emerged as early signals of demand diffusion.

Inventories shift from “drag” to “lean”: upside risks stem here

Inventories are repeatedly cited as a key “explanation” in the report. In early 2025, a surge in end demand (especially capex) outpaced output temporarily, slowing inventory accumulation; then output caught up quickly, turning inventory’s contribution to manufacturing growth slightly positive by mid-year. The report believes that by the end of 2025, inventory drag will largely dissipate, and levels may even be lean.

This is also part of their “dual-sided” risk assessment: if demand sustains at current levels, low inventories could force additional restocking, providing upside potential beyond current demand.

Tariff and judicial changes: limited impact—trade conflict mainline remains

The report mentions the US Supreme Court’s recent move to overturn the IEEPA tariffs, which appears positive on the surface, but JPMorgan’s conclusion is: this is more about constraints on policy tools rather than a shift in trade stance. The government subsequently announced 15% Section 122 tariffs with multiple exemptions, which overall has limited impact on effective tariff rates and the US trade conflict trajectory, unlikely to disrupt the improving business confidence.

Next few months: a 2%-3% annualized growth window, with risks on both “tech and employment” sides

With “lean inventories + stable end demand + potential demand expansion beyond tech,” the report expects global industrial output to continue growing at 2%-3% annualized in the coming months.

But they clearly outline two downside risks: first, tech growth may slow to more sustainable levels; second, labor market stagnation could suppress retail and consumer goods demand. The baseline assumes corporate caution eases, hiring picks up, and consumption becomes more “income-driven.” If this doesn’t happen, the structural anomaly of “industry outperforming services” in 2025 could narrow again.

All content above is from Wind Trade Platform.

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