Global and Finnish Economic Outlook

Declining uncertainty paves the way for recovery in demand

Published 7.8.2025

In spite of massive uncertainty and high tariffs, the resilience of both the US and European economies exceeded expectations in the first half of the year. Although the political agreement that was reached on the key terms of trade between Europe and the US is unambiguously extremely weak for Europe, it does substantially reduce the uncertainty that has plagued the market. Many of the details remain open and the finalised trade deal is still a long way off, but companies are now in a better position to make investment decisions, for example. It is hoped that projects that had been put on hold will finally start moving ahead, leading to a substantial pick-up in demand during the rest of the year.

The global economic growth forecast issued by the International Monetary Fund IMF in July was up slightly compared with the previous forecast published in April. However, it is still well below the forecast drafted in January before the tariff threats hit in the spring.

The IMF states that it upgraded the outlook for the current year because the tariffs and uncertainty had a smaller-than-expected impact on economic growth in the first half of the year. The forecast for the United States for this year was increased by 0.1 percentage points compared with the previous forecast. The growth forecast for the eurozone was up 0.2 percentage points. China’s growth forecast was increased particularly sharply, by as much as 0.8 percentage points. The IMF explains that the outlook for China was improved by better-than-expected performance in the first half of the year and lower-than-expected tariffs.

It is clear that global trade barriers are holding back growth worldwide – even if the forecasts have been raised slightly and economies have shown their resilience against the trade war. The slowdown is particularly harmful to small open economies like Finland, where growth in wellbeing is closely linked to the success of exports.

The latest preliminary data on second-quarter growth in both the United States and the eurozone were slightly better than expected. The United States avoided sliding into a recession by a good margin, with the economy seeing surprisingly strong quarter-on-quarter growth of 0.8 per cent. The eurozone economy grew by 0.1 per cent on the previous quarter. The preliminary data thus suggest that the economies have demonstrated reasonably strong resilience in the face of the uncertainty caused by the threat of a trade war.

The European manufacturing industry is gradually improving in spite of the trade war

Based on the Purchasing Managers’ Indices in the eurozone, the impact of US President Donald Trump’s threats of tariffs on the European economy and industry will ultimately be rather minor. The PMIs thus tell a similar story as the preliminary data on the trend in GDP.

The situation in industry has steadily improved this year and the PMI suggests that production is gradually picking up. Although the responses indicate that the overall situation has improved, companies still report that the situation is weak in terms of new orders and order books.

In other words, the figures do not as yet point to a clear or strong economic recovery. On a more positive note, the threat of a trade war has not led to further deterioration in the business cycle. It is hoped that with a tariff agreement in place, order intake could finally show a significant upturn during the rest of the year.

In the United States, PMIs in both manufacturing and the service sector continued to fluctuate strongly over the summer. Great variations make it more difficult to interpret the indices and draw firm conclusions. It seems that companies are finding it difficult to assess the situation and their views are changing rapidly. This is, of course, very understandable given the erratic political decision-making in the country.

US-EU trade agreement creates the conditions for investment projects to move forward

Although the trade deal (to the extent that its details are known at the time of writing) between the US and the EU is undeniably and obviously lousy for the EU, it does provide clarity to the uncertainty that has long prevailed in both Europe and the US.

The agreed tariffs will in themselves have an almost unambiguously negative impact on the Finnish technology industry. It remains to be seen to what extent the agreed 15 per cent tariff level will ultimately affect companies’ turnover. Based on the results of the Teknobaro survey conducted earlier this year, a 15 per cent tariff level could be estimated to reduce turnover in the industry by 3-5 per cent compared to a situation where no tariffs would apply. Companies state that the negotiated tariffs will inevitably have a negative impact on trade, albeit it is estimated that it will still be rather moderate.

Although the impact of the tariffs cannot as yet be predicted with any precision, the best-case scenario is that the agreement on the terms of trade will ease up market uncertainty to the extent that companies will start moving ahead with projects that they had put on hold. Companies in the technology industry widely report that they have not actually cancelled projects, but have simply not taken decisions due to the prevailing uncertainty.

In the best case, we might see demand pick up, or even surge, in the third quarter. On the other hand, if demand does not start to recover in spite of the easing up of uncertainty, the situation will start to look very serious.

The economic outlook of the manufacturing industry improved slightly in July

The Confederation of Finnish Industries’ (EK) Business Tendency Survey in July indicates that the situation and outlook for manufacturing remained relatively unchanged, and even the slight changes that were seen were in line with expectations. In manufacturing as a whole, companies estimated in July that the current cyclical situation was slightly weaker than in April, but their expectations for the future improved again slightly. The results reflect the massive uncertainty about issues such as future tariffs that overshadowed the second quarter.

The EK Business Tendency Survey paints a picture of a stagnant economic climate. The situation has been expected to improve for over a year, but there are still no indications of a clear turn for the better in the business cycle.

Resilience and waiting – order intake in the second half of the year will tell us a lot about the development of the business cycle

Companies have now been waiting for a turnaround for about a year. Expectations of improvement started to mount in late summer 2024. However, we had to wait for the turnaround. At the beginning of this year, we finally saw concrete signs of a turn for the better. The outbreak of the trade war in April and the ensuing massive uncertainty caused the economic outlook to cool again fast in the first half of the year.

Despite all the uncertainty, companies have consistently been more upbeat than gloomy. Their positive overview of the situation is based on the fact that there is constant activity and interest in the market. All that we lack are decisions.

As uncertainty fades and financial conditions are now more favourable than they have been for some time, expectations are also riding high at many companies. It is hoped that projects will finally start to move forward. If this happens, it will be reflected in companies’ order books in the second half of the year.

If demand does not start to pick up clearly at that time, it will be a concerning signal about the direction of general economic development.

Technology Industries in Finland

Order intake in the technology industry holds up in spite of uncertainty

In 2024, the turnover of technology industry companies in Finland rose by approximately 1 per cent on 2023. Turnover fell in mechanical engineering and the metals industry. Turnover grew in the electronics and electrotechnical industry, information technology and consulting engineering. In 2024, their turnover in Finland amounted to slightly more than EUR 100 billion. In 2024, turnover was depressed by both a decrease in production volumes and a decline in producer prices.

In January-April of this year, turnover in the Finnish technology industry was 4 per cent higher than twelve months earlier.

The monetary value of new orders in the April-June period was 5 per cent higher than in the previous quarter and 15 per cent higher year-on-year. The euro-denominated order intake was significantly better than feared. However, it cannot be described as good in any way. It is encouraging that, in spite of the uncertainty, technology companies have been able to land orders. The better-than-expected second quarter, coupled with the easing of uncertainty, fosters positive expectations for the second half of the year.

The balance figure for tender requests in July was +7, remaining on a par with the spring. The positive balance figure indicates that market activity remained relatively upbeat in spite of the uncertainty. The buoyant market bodes well for an upturn towards the end of the year.

At the end of June, the value of order books was 4 per cent higher than at the end of March and 14 per cent higher than in June 2024.

Based on order intake in the first half of the year, the turnover of technology companies is expected to increase this year.

The number of personnel employed by technology industry companies in Finland at the end of June was 0.1 per cent higher than at the end of March. At the end of June, the industry employed approximately 330,800 people. According to the personnel survey by Technology Industries of Finland, the number of employees affected by temporary lay-off procedures at the end of June was approximately 8,200. The technology industry provided approximately 15,200 summer jobs in 2025.

Recruitment of new employees was at a good level in the April-June period. In total, recruitments came to approximately 7,800. Some companies were increasing their payroll, while others were hiring new employees due to retirements and employee turnover.

Economic Outlook on technology industry’s sub-sectors

ECONOMIC OUTLOOK 3 | 2025

Information based on the situation on 7 August 2025

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Next Economic Outlook will be published 6th November 2025 at 10.00 am.

Contacts

Economy and Sustainable Growth Management

Rautaporras Petteri

Executive Director, Chief Economist – Economy and Sustainable Growth Technology Industries of Finland

+358 503042220 petteri.rautaporras@teknologiateollisuus.fi

Economy and Sustainable Growth

Mikkonen Hanne

Senior Economist – Economic Development and Investment Technology Industries of Finland

+358 440296152 hanne.mikkonen@teknologiateollisuus.fi