Welcome Back to The Weekly Echo

As we head into the final days of April, the economic landscape feels heavy with uncertainty, and that’s exactly what we’re diving into this week.

While last week was relatively quiet in terms of dramatic new headlines, some important undercurrents have emerged that we couldn't ignore. Confidence, momentum, and expectations are all shifting.

First, we turn to the UK, where a record-breaking one million young people aged 16 - 24 are now officially classified as "Not in Education, Employment, or Training" (NEETs), raising serious concerns about the future of the British labour market.

Across the Atlantic, the news isn’t much better. U.S. stocks have underperformed the rest of the world by the widest margin since 1993, highlighting deep investor unease as the trade war with China drags on.

Speaking of China, we also examine the world's second-largest economy, which just posted its largest-ever first-quarter budget deficit and has dramatically increased bond issuance by over 60% compared to last year, a clear signal that internal pressures are mounting.

And finally, back home, new polling shows British consumer confidence has collapsed to its lowest level since at least 1978, raising big questions about the economic recovery narrative, and what could come next.

It’s a packed edition as always, let’s get into it.

1. A Generation at Risk? Over 1 Million Young People in the UK Are ‘NEET’

The UK’s latest labour market figures revealed a worrying trend: over 1 million young people aged 16 to 24 are now classified as NEET - not in education, employment, or training.
This is the highest figure recorded since 2011, raising concerns about the long-term economic and social impact of a "lost generation."

What Does NEET Mean?

NEET is a formal category used in labour statistics to describe young people who are not:

• In full-time or part-time education,
  

• Working in any form of employment,
  

• Or enrolled in a vocational training program.

The NEET rate is often seen as an early warning signal for broader economic vulnerabilities, especially around future labour productivity and social stability.

Why Is This Happening?

Several factors are converging:

• Weak job market for young workers: Many sectors that traditionally hired younger workers, like retail, hospitality, and entry-level office roles, are still struggling post-pandemic or facing automation pressures.
  

• High cost of education: Rising living costs are discouraging some from staying in full-time study, while cuts to financial support make it harder to combine education with part-time work.
  

• Skills mismatch: There’s growing evidence that the skills young people are leaving school or university with do not always match the needs of today's labour market, especially in technical and digital sectors.

Economic Implications

A high NEET rate is a major concern for any economy:

• Lost productivity: When large numbers of young people are not gaining experience or skills, it weakens future workforce productivity.
  

• Higher public spending: Governments face rising costs for unemployment benefits, training programs, and long-term support services.
  

• Lower tax base: Fewer young people earning salaries means less income tax collected, which can worsen budget deficits over time.
  

• Social consequences: Being NEET for long periods is linked to poorer health outcomes, lower lifetime earnings, and greater risk of poverty.

What Can Be Done?

Economists and policymakers are calling for:

• Targeted vocational training: More programs that match training directly with job market needs, particularly in digital, green energy, and healthcare sectors.
  

• Apprenticeship expansion: Incentives for businesses to hire and train young workers.
  

• Reforms in education funding: Better financial support to help young people access higher education and training opportunities without crippling debt.
  

• Flexible employment programs: Encouraging businesses to offer more part-time, remote, and flexible roles that can accommodate young workers' needs.

Bigger Picture

The challenge facing the UK mirrors a wider trend across many advanced economies: finding ways to keep younger generations economically active in a rapidly changing world of work. If unaddressed, today's NEET crisis could become tomorrow's structural labour market weakness.

2. U.S. Stocks Lag the World: Worst Relative Performance Since 1993

For the first time in over 30 years, U.S. stock markets are seriously underperforming their global peers.
According to new data, the gap between U.S. equities and the rest of the world is now the widest since 1993, a period marked by slow domestic growth and major international expansion elsewhere.

What’s Happening?

• The S&P 500 - often seen as the benchmark for U.S. corporate health - has lagged behind global indices by more than 6% so far in 2025.
  

• European and Asian markets have been notably stronger, supported by cheaper valuations, falling interest rates, and a surge in global trade ties outside the U.S.
  

• Emerging markets, typically considered risky bets, have also rallied sharply as capital looks for higher returns abroad.

In contrast, U.S. markets have been weighed down by:

• Persistent inflation pressures, especially in services and energy.
  

• Trade tensions with China and others, raising concerns over earnings for multinational companies.
  

• A weaker U.S. dollar, hurting international revenue streams for American firms.
  

• Higher relative valuations, making U.S. stocks look expensive compared to overseas opportunities.

Why This Matters

Historically, U.S. markets have outperformed thanks to strong earnings growth, tech sector dominance, and a resilient consumer economy. But the current environment is challenging those assumptions:

• Higher interest rates are squeezing corporate margins.
  

• Supply chain realignment is increasing costs, especially for tech and manufacturing giants.
  

• Trade uncertainty is forcing companies to rethink global strategies and investors to look for alternatives.

Meanwhile, European and Asian markets are benefiting from:

• Lower starting valuations - many stocks were already priced cheaply after years of underperformance.
  

• Central bank rate cuts, particularly in the eurozone and parts of Asia, are stimulating demand.
  

• New trade alliances beyond the U.S., opening up fresh export opportunities.

Bigger Shifts Beneath the Surface

Some analysts warn that this isn’t just a short-term dip; it could signal the start of a broader rebalancing:

• Global diversification could make a comeback after a decade dominated by U.S. mega-cap tech.
  

• Emerging market resurgence could reshape global capital flows, particularly if inflation continues to moderate globally but remains sticky in the U.S.
  

• A weaker dollar would also shift investment patterns, encouraging more global investment outside traditional U.S. strongholds.

Context: Remember the 1990s?

The last time the U.S. underperformed this badly relative to the world, it was during the early 1990s:

• Domestic growth was slowing post-recession.
  

• Globalisation was accelerating, with major economic booms in Asia and Europe.
  

• U.S. corporations had yet to fully capitalise on the internet revolution that would later drive massive outperformance.

In short, it was a structural shift, not just a bad few months.

Final Thought

While no trend is guaranteed to persist, the current environment suggests investors can no longer simply "buy U.S. tech and forget it”. Diversification (both across sectors and geographies) is becoming increasingly important in navigating this new global landscape.

3. China’s Growing Strains: Record Q1 Deficit and Surging Bond Issuance

China posted its largest first-quarter fiscal deficit in history, adding to concerns about the country's economic trajectory amid weak consumer demand, deflationary pressures, and intensifying global trade tensions. A deficit is when the value of a country's spending exceeds its income. 

According to official data, China’s Q1 2025 budget deficit ballooned to 2.8 trillion yuan ($390 billion), a staggering figure even by global standards. Meanwhile, the government issued over 60% more bonds compared to the same period last year, underscoring the scale of stimulus efforts now underway. 

What’s Going On?

China’s fiscal accounts have come under pressure from several directions:

• Weak Tax Revenues: Sluggish domestic demand, declining corporate profits, and soft property markets have all weighed on government income.
  

• Rising Expenditures: Authorities have ramped up infrastructure spending and public-sector support measures to stabilise growth.
  

• Global Trade Shifts: As trade frictions with the U.S. escalate, Chinese exporters are facing new barriers, reducing business activity and government receipts.

In simple terms: China is spending more to prop up growth, while collecting less revenue - a combination that’s widening the deficit at a historic pace.

Why Issue So Many New Bonds?

Government bonds are a tool for raising money, allowing the state to fund stimulus programs today by borrowing against future income.

In the first three months of 2025:

• Local governments issued 1.6 trillion yuan in special bonds, often used for infrastructure projects.
  

• National government bond issuance also spiked as Beijing sought to maintain momentum through large public investments.

The aim? To offset weak private-sector activity and keep headline GDP growth near official targets. 

Key Economic Takeaways

• Short-Term Support: Bond-financed stimulus can keep growth stable in the short run - funding roads, railways, renewable energy, and social housing.
  

• Long-Term Risk: Rapid debt accumulation raises concerns about sustainability, particularly at the local government level, where off-balance-sheet liabilities are already high.
  

• Investor Concerns: Rising bond issuance could pressure China's domestic financial system if demand for government debt weakens. Higher bond yields could raise borrowing costs across the economy.

Context: China’s Changing Model

Historically, China’s growth was driven by exports and real estate. Today, both pillars are under strain:

• Exports are vulnerable to tariffs, global supply chain shifts, and slowing demand from major economies.
  

• Property markets remain fragile, weighed down by high debt, tighter regulations, and cautious buyers.

This leaves public investment and consumer spending as critical drivers. But with consumer confidence still soft and geopolitical risks rising, authorities have leaned heavily on public sector demand, financing it through rising debt.

Final Thought

China’s Q1 numbers highlight a key reality: stabilising growth now comes at a higher financial cost. While the government has the tools to manage short-term risks, the long-term challenge will be balancing stimulus with fiscal discipline, especially as global markets watch China’s debt dynamics more closely.

For now, expect Beijing to keep spending, but with rising scrutiny from bond markets and international investors alike.

4. Britons' Confidence Plummets to Lowest Level Since 1978

New data from an Ipsos MORI survey released this week paints a stark picture of public sentiment in the UK: confidence in the economy has dropped to its lowest point since at least 1978, when modern polling records began.

Only 12% of Britons surveyed said they believed the country’s economic situation would improve over the next 12 months, a stunning collapse in optimism that cuts across age, region, and political affiliation.

What’s Driving the Collapse in Confidence?

Several factors are converging to push sentiment lower:

• Stagnant Growth: The UK economy has struggled to generate meaningful expansion, with GDP forecasts trimmed repeatedly over the past year.
  

• Sticky Inflation: Although headline inflation has cooled slightly, core inflation (excluding volatile food and energy prices) remains elevated, squeezing household budgets.
  

• High Interest Rates: Mortgage holders and businesses are feeling the strain of prolonged high borrowing costs, dampening investment and consumer spending.
  

• Labour Market Tensions: While unemployment remains low, wage growth has been patchy, and concerns over job security are rising, particularly among younger workers.
  

• Political Instability: Uncertainty around fiscal policy, leadership direction, and the broader post-Brexit economic model continues to weigh heavily on public confidence.

How Bad Is It Historically?

To put this in context:

• Worse than the early 1990s recession that saw widespread job losses and a housing market crash.
  

• Worse than the aftermath of the 2008 Global Financial Crisis, when banks collapsed and austerity programs dominated political discourse.
  

• Even worse than during the COVID-19 pandemic, when lockdowns plunged the economy into its steepest contraction on record.

Ipsos MORI, which has tracked public opinion on economic expectations for decades, said this is the most negative reading it has ever recorded.

Economic Concepts at Play: Why Confidence Matters

Consumer confidence is not just a "mood"; it is a key driver of economic activity.
When people feel pessimistic, they tend to:

• Spend less on non-essential goods and services (hurting retail, hospitality, and entertainment sectors).
  

• Save more defensively (reducing money circulating through the economy).
  

• Delay big-ticket purchases like homes, cars, and appliances (dragging down investment and production).

Low confidence can therefore create a self-fulfilling slowdown, where fear of recession helps bring about the very weakness people are worried about.

Broader Implications

• Political Repercussions: With a general election approaching, economic discontent is likely to be a major issue on the campaign trail.
  

• Policy Response: The Bank of England and the Treasury face growing pressure to stimulate growth, but options are limited given inflationary risks and high public debt.
  

• Global Impact: The UK’s persistent economic malaise could drag on broader European growth and dampen investor enthusiasm for British assets like the pound and gilts.

Final Thought

The Ipsos MORI results serve as a powerful warning: Economic performance is about more than just numbers on a spreadsheet; it’s about how people feel. And right now, Britons are feeling more pessimistic than at any point in living memory. Turning that around may prove harder and slower than policymakers hope.

Thanks for Reading!

That’s everything for this week’s edition of The Weekly Echo.

As always, thank you for taking the time to catch up with us. Your support means everything. If you’ve got any thoughts, feedback, or suggestions for topics you’d love to see covered, just hit reply and let us know. We always enjoy hearing from you.

Have a great week ahead,
Harry & Reika
 Co-Founders, Echonomics

📚 Missed an edition? You can catch up on all previous stories right here.