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Daily Economic Update
15.06.2025Oil: Prices soar after Israel attacked Iran. Oil prices spiked on Friday following Israeli strikes on Iranian nuclear facilities, marking a significant escalation in the conflict. Brent futures traded near $78/bbl during the intraday session but closed Friday at $74.2/bbl, up 7% d/d and 11.7% w/w, paring year-to-date losses to just 0.5%. The recent escalation could also be more sustained, with the two-sides continuing to exchange missile barrages against one another throughout Saturday as well. So far, the impact on global oil supplies has been limited as Israeli strikes have targeted domestic energy assets, such as gas processing facilities and a refinery in the South Pars field rather than export terminals. The closure of the Strait of Hormuz, which accounts for 11% of global seaborne trade by volume, remains an unlikely though not-to-be-completely discounted scenario given Iran’s reliance on the passage of its own goods through it, including its oil exports, to its important and strategic trading partners (China being the most important), and the risk that such an act would likely immediately draw the United States into the conflict against it. Nevertheless, continued escalation raises the possibility of supply loss through the reduction of Iranian oil exports as well as higher shipping costs. Market participants will be on the lookout for further developments on this front. The oil market will also be looking to assess the state of global oil demand and supply this week, with the publication of the OPEC and the IEA monthly oil market reports, on Monday and Tuesday, respectively.
Kuwait: Softening business credit in April after four solid months but household credit growth improved. Domestic credit increased by a strong 1.3% in April, the fastest monthly growth in three years, driving up YTD growth to 3% (5.7% y/y). Headline growth in April was significantly supported by soaring credit for securities purchase (6.8% m/m) and lending to banks and financial institutions (13% m/m), which together accounted for 83% of the increase in credit during the month. Growth in business credit, after four solid months, softened to 0.2% m/m pushing up the YTD increase to 2.8% (5.3% y/y). Unlike the first three months of the year, business credit growth was not broad-based across the different sectors with ‘other services’ accounting for all the growth while four main sectors were in the red. From a YTD basis, ‘other services’ (+5.6%) and ‘trade’ (+5.3%) are in the lead. Household credit increased by 0.3% m/m, the fastest growth in five months, driving YTD growth to a still-limited 0.7% (3.3% y/y). However, in both 2023 and 2024, household credit was much stronger in the second half of the year than in the first half. We note that Warba Bank’s rights issue (KD 437 million) subscription process overlapped with April’s month-end, and hence, has likely skewed some credit, and deposit, growth numbers. Resident deposits increased by a strong 1.6% m/m on soaring public institution deposits and a solid increase (1.2% m/m) in private sector deposits, though government deposits tumbled by 8%, its sixth down month in the past seven. On a YTD basis, private sector deposits are up 3.2%, public institution deposits 11%, while government deposits are down by 12%.
US: Wholesale prices rebound less than forecast but weekly jobless claims elevated. PPI inflation in May rebounded to 0.1% m/m for both headline and core from a decline of 0.2% each in April but was below forecast, signaling the muted impact of high tariffs thus far. Annually, PPI inflation ticked up to 2.6% from April’s 2.5%. Previously reported consumer price inflation prints also exhibited a limited increase in prices. However, a steep rise in energy prices, if sustained, following heightened geopolitical tensions in the Middle East along with intensified tariff pass-through could potentially alter the inflation trajectory in the coming months. Meanwhile, initially weekly jobless claims climbed to an eight-month high of 248K (w/e Jun 7), with continuing claims (w/e May 31) rising to the highest since late 2021 at 1.96mn from 1.9mn the previous week, showing signs of a weakening labor market amid government policy uncertainty. Finally, consumer sentiment, according to a University of Michigan survey, improved to 60.5 in June from a nearly three-year low in May. Consumers’ inflation expectations also moderated to 5.1% and 4.1% from May’s several decades high of 6.6% and 4.2% for one-year and five-year horizons, respectively, as worries about government tariff policy somewhat eased. We think that the economic data over the coming period may continue to send unclear signals until the uncertainty around the administration’s tariff and other policies settles.
UK: April GDP contracts more than expected as consumers pullback and amid US tariffs fallout. The UK economy in April shrank by a more-than-forecast 0.3% m/m after March’s robust growth of 0.2%. The monthly fall was driven by a 0.4% decline in the services sector (including legal and real estate activities) and manufacturing (-0.9%), but construction rose 0.9%. The changes in the stamp duty structure, which became effective in April, dampened real estate activity following a surge in prior months, driving a sharp contraction in related services. Moreover, higher utility charges for the current quarter and a drop in employment levels in recent months following increased employers’ NIC outlays may have adversely affected overall household spending. On an annual basis, growth slowed to a 10-month low of 0.9% from 1.1% in March. Meanwhile, UK’s merchandise exports fell 8.8% m/m in April as shipments to the US dropped by 31% following 10% ‘reciprocal’ tariffs that were imposed during the month. Non-US exports also decreased by 3.5%, leading to an expansion in the overall goods trade deficit to £23bn from March’s £19.9bn, the biggest deficit since January 2022. Amid the above-mentioned domestic developments and ongoing global trade uncertainty, the economic growth outlook for Q2 appears uninspiring with the Bank of England projecting a meagre 0.1% q/q rise after Q1’s strong 0.7% growth.
Japan: Industrial production declines in April. The industrial production index fell by 1.1% m/m in April, reversing the gains seen over the previous two months. On a yearly basis, industrial production growth was marginal at 0.5% and slower than the 1% increase seen in March. The monthly decline was mainly attributed to a steep contraction in production machinery (-8.7% m/m versus 7.1% in March), transport equipment excluding motor vehicles (-4.1% versus 6.6%), and fabricated metals (-3.8% versus -0.6%). Moreover, motor vehicle production continued to fall in April, though at a slower pace (-0.9% versus -5.9%) with the decrease expected to continue over the coming months due to the imposed 25% tariff on imported passenger vehicles and auto parts to the US.