Daily Economic Update

US: PMIs signal muted business confidence and higher inflation amid tariffs, economic uncertainty. The S&P Global Flash composite PMI for April dropped to a 16-month low of 51.2 from 53.5 in March, as business expectations fell due to rising uncertainty about tariffs and other government policies. Although manufacturing fared better, improving to 50.7 from March’s 50.2, growth in services slowed substantially to 51.4 from 54.4 as export orders fell. Businesses were also generally downbeat about future growth prospects. Meanwhile, employment continued to rise, for the fourth month in five but the rate of hiring eased, signaling caution on the unclear demand environment. However, price rises increased at their steepest pace in thirteen months across manufacturing and services, and more so in the case of goods, driven by rising import prices and higher labor costs. While it is still early for a full prognosis, the upward pressure on wages, if sustained, could make the Fed extra cautious on its future policy stance. On the tariff front, some media outlets reported that import duties on China were being cut by up to 50% or more, but Treasury Secretary Bessent later clarified that the US administration hasn’t made such “unilateral” offers. He believed that current ‘unsustainable’ tariffs by both sides would have to come down mutually before talks with China could proceed. He also mentioned that a trade deal with India appeared “very close.”

Eurozone: Overall business activity weakens in April, though the rate of decline manufacturing eased. The Eurozone Composite PMI dropped to 50.1 in April, falling below the consensus expectation (50.3) and March’s seven-month high of 50.9. Manufacturing activity was steady but continued to range in contraction territory at 48.7, though this was the slowest rate in twenty-seven months and it could benefit ahead from Europe’s plans to dramatically increase defense spending. The services sector, however, dropped into contraction territory in April for the first time in five months, falling to 49.7 from 51.0 in March. Elsewhere, the Eurozone’s balance of trade rose to €24 billion in February, fueled by a 22% y/y increase in exports to the US as companies front-loaded orders ahead of the imposition of tariffs.

UK: Business activity unexpectedly contracts, weaker public finances limit Chancellor’s fiscal space. The S&P Global Flash composite PMI in April fell below the 50-mark for the first time since October 2023, coming in at a twenty-nine-month low of 48.2 from 51.5 in March. While manufacturing (at 44) continued to shrink for a seventh straight month, services activity also sank, to 48.9 from 52.5 in March, a twenty-seven-month low. The slump was attributed to weakening international demand amid the imposition of US tariffs and a drop in overall confidence. The gauge of future activity fell to its lowest level since October 2022, with firms seeing subdued domestic conditions as a cause for caution. The employment gauge also remained in a downturn for the seventh consecutive month, while the input cost index expanded at its fastest pace since February 2023 amid higher minimum wages and rising national insurance contributions. Meanwhile, adding further pressure on the government, the fiscal deficit in March widened more than the forecast, which, along with downward revisions to previous months’ tax receipts, worsened the overall deficit in FY24/25 to 5.3% of GDP compared to the official forecast of 4.8% and a 4.8% deficit in FY23/24. Net debt (public sector excluding banks) stood at 95.8% of GDP in March 2025, the highest since the 1960s and edging up on last year’s reading of 95.6% of GDP. Despite a weak growth outlook, the deteriorating public finances could push Chancellor Reeves towards further fiscal tightening to meet her rules, i.e., balance current spending and tax revenues by FY29/30.

Egypt: Largest state-owned banks cut interest rate on 3 Yr CDs by 2%. Banque Misr (BM) and National Bank of Egypt (NBE) have announced that they will bring down interest rates by 2% pts on the 3-year certificate of deposits (CDs) (from 30-25-20% for the 1st, 2nd, and 3rd year to 28 – 23 – 18), which brings down the average interest rate from 25% to 23% for the total period. Additionally, the banks have put an end to the 1-year CDs that are currently offering 27%. Both decisions will be effective from Sunday 27 April. The move comes after the Central Bank of Egypt cut interest rates by 2.25% pts last week with further rate cuts to come. In our opinion, the new rates would still be encouraging for the Egyptian public to take advantage of, and we believe that bringing down the average rate to about 20% (versus 23% as of Sunday) will allow for a stronger monetary easing transmission mechanism, as some retail clients could start to shift to alternative asset classes. Additionally, a further drop in policy rates would also push down government treasury yields to around 20% (net of tax), which could also allow banks to start to shift some of their treasury investments into corporate debt, assisted by a recovery in corporate borrowing.    

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