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Daily Economic Update
26.10.2025
US: Softer-than-expected CPI inflation cements a Fed rate cut this week. CPI inflation in September came in milder than expected across the board, with the headline rate rising to its joint highest this year at 3.0% y/y (+0.3% m/m) from August’s 2.9% (+0.4% m/m) but below the 3.1% consensus forecast, as annual deflation in gasoline prices eased during the month. Core price rises, however, decelerated to 3% (+0.2% m/m) from 3.1% (+0.3% m/m) as used vehicles and auto insurance costs each fell by 0.4% m/m. Even within the shelter sub-component (+3.6% y/y, +0.2% m/m), the largest rise on a monthly basis came from hotel accommodation rather than the usual contributor, ‘owners’ equivalent rent’, which recorded its slowest monthly advance since end-2020. However, there were more signs of tariffs being passed through to consumers as many commodities, including apparels, appliances, and furniture, posted accelerated m/m increases. Nonetheless, hopes are rising that faster disinflation in services may help keep a lid on overall inflation ahead even while the impact of tariffs remains unclear. Softer inflation prints further cemented expectations of a 25-bps interest rate cut at the FOMC meeting on October 28-29, with the futures market also signaling an additional cut in December. However, the September CPI report may be the last one before the FOMC meeting in December, as the White House announced that, given the ongoing government shutdown, the next CPI report was unlikely to be released. Meanwhile, the S&P Global Flash PMI in October rose faster than expected on broader accelerations in manufacturing (to 52.2 from September’s 52) and services (to 55.2 from 54.2). The survey highlighted an expansion in new orders and output while employment posted a limited pick-up. Output price rises moderated, but firms cited intensifying input cost burdens due to higher tariffs and wage pressures. Exports fell, and business optimism worsened to near its weakest in three years on tariffs and other government policies. Overall, based on these PMIs, the US economy likely started Q4 fairly solidly despite the government shutdown, while anticipated Fed interest rate cuts this year should provide additional tailwinds over the near term. Finally, the US and Chinese officials started another round of trade talks yesterday, with US authorities calling the latest discussions “very constructive” and Trump scheduled to meet President Xi in South Korea on October 30.
Eurozone: October’s flash PMI points to a stronger-than-expected pick-up in business activity. The HCOB Flash Eurozone composite PMI rose to 52.2 in October from 51.2 in September, marking the tenth consecutive month of expansion and the fastest pace in 17 months. Services led the improvement, with the PMI climbing to a fourteen-month high of 52.6 while manufacturing inched up to 50.0, beating expectations of 49.5. The improvement in the services sector was driven by the fastest increase in new orders in over two years and a notable pickup in hiring, with employment growing at its quickest rate since mid-2024. In contrast, manufacturing firms continued to cut jobs, underscoring the uneven nature of the recovery. Inflationary pressures remained moderate, with input costs rising slightly and firms passing on higher prices at a controlled pace, reinforcing the ECB’s current pause on rate cuts. However, business confidence dipped to a five-month low, reflecting lingering uncertainty, particularly around France’s fiscal instability, which continues to weigh on regional sentiment. Overall, the data suggests a cautiously improving, though uneven, outlook and ongoing vulnerability to political and external shocks.
UK: Business activity improves in October and retail sales in September unexpectedly rise. The S&P Global Flash composite PMI in October posted a better-than-expected improvement, rising to 51.1 from September’s 50.1. The gauge of manufacturing rose to its highest reading in a year at 49.6 (46.2 in September) and services marginally accelerated to 51.1 (50.8 in September). Employment continued to shrink, albeit at a softer pace. Firms were generally nervous about soft consumer sentiment and cautious business investment decisions ahead of the Autumn Budget next month. However, price pressures eased as the output inflation measure dropped to its lowest since June. The survey highlighted some tentative improvement in business optimism, suggesting a further rebound in operating conditions ahead. On a further positive note, retail sales (volumes) in September surprisingly increased by 0.5% m/m (1.5% y/y) from an upwardly revised 0.6% (0.7% y/y) in August despite adverse weather during the month. Combined, it appears that the economy likely posted slight growth in Q3, though the broader outlook remains uninspiring for now amidst uncertainty about government consolidation measures and a weak job market.
China: The Fourth Plenum concludes with leadership emphasizing focus on boosting domestic demand and long-term pivot toward innovation-led growth. According to a state media, at the close of China’s fourth plenum, which took place on October 20-23, the top leadership pledged to ramp up domestic consumption and investment over the next five years alongside efforts to deepen self-reliance in advanced technologies. It is worth noting that the latest policy readout reflects a preference for stimulating demand indirectly, rather than through bold fiscal transfers. Demographic pressures were addressed through proposals to raise the retirement age and expand childcare access. However, despite acknowledging persistent economic stress from youth unemployment and property sector fragility, the plenum offered few new remedies, suggesting possibly continued reliance on existing policy tools. Meanwhile, on the geopolitical front, China signaled openness to dialogue with the US ahead of the imminent Xi-Trump meeting.
Japan: Inflation remains sticky and PMI weak in October; Prime Minister to meet with Trump on Tuesday. After falling for four straight months, headline inflation edged up to 2.9% y/y in September (2.7% in August), remaining above the Bank of Japan’s (BoJ) target for around 3.5 years now. Similarly, core inflation (which excludes fresh food) accelerated to 2.9% in September (2.7% in August), coming in line with consensus expectations. However, a “super core” measure (excluding fresh food and energy) that is closely followed by the BoJ, softened to 3% (3.3% in August), the lowest level since April. High inflation is one of the key issues that ought to be tackled by the new prime minister Takaichi, who will be meeting President Trump on Tuesday, during his visit to East Asia. Meanwhile, the flash composite PMI for October fell to 50.9 (51.3 in September), the lowest level since May, with the weakness driven by both services, which fell to 52.4 from 53.3, and manufacturing (to 48.3 from 48.5), which came in below expectations.
Egypt: Remittances surged 47% y/y in the first eight months of 2025, reaching $26.6 billion. Remittances to Egypt surged by 47% y/y to $26.6 billion in the first eight months of 2025 (January–August). August alone saw around $3.5 billion, an increase of almost 33% y/y on the $2.6 billion recorded in August 2024.The consistent monthly inflows of over $3 billion highlight the renewed confidence of Egyptians abroad and the improved foreign exchange dynamics in the banking system since early this year. If this momentum continues, total remittances could exceed $38 billion by year-end, which would be the highest annual level ever for Egypt.