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Daily Economic Update
21.04.2025Kuwait: Inflation eases in March amid broad-based price softness. Consumer price inflation eased to 2.4% y/y in March, softening from 2.5% in the previous month amid subdued price growth in most components. The prices of food & beverages and housing services (mostly rents) both rose at a shallower pace in March, 5% y/y and 0.7%, respectively. Core inflation, which excludes food and housing, also edged down to 2.4% y/y from 2.5% in February with price rises softening across most components in annual terms. Inflationary pressures in clothing & footwear – the subindex with the fastest average annual growth in the last two years – eased as growth slowed to 4.3% y/y, the lowest since September 2020. Across other categories, inflation accelerated only in the furnishings & household maintenance and education categories, while the rate of deflation slowed slightly in the transport segment. The latest headline inflation reading is in line with our forecast of 2.4% (average) for this year.
Oil: Prices rise despite demand growth cuts; OPEC announces new compensatory cuts schedule. In a shortened trading week, Brent futures settled at a two-week high of $68/bbl on Thursday, recording a 4.9% increase for the week after two consecutive days of gains amid talk of a US-EU trade deal and further sanctions on Iran’s energy exports including on another independent Chinese refinery known to have purchased Iranian crude. Oil’s rise occurred despite further downgrades to oil demand growth by international bodies, the latest being the International Energy Agency’s 300 kb/d cut to growth to 730 kb/d for 2025, the weakest annual rate since the pandemic. Last week, OPEC+ unveiled an updated compensatory cuts schedule for the eight exporters participating in 2024’s voluntary cuts (2.2 mb/d). All ‘group of eight’ members, except for Algeria, which did not overproduce, are expected to reduce crude production over the coming months by an amount equal to the volume of crude they pumped above their designated quota during the January 2024 to March 2025 period, as assessed by OPEC secondary sources. For Iraq, the largest serial overproducer, this compensatory cut works out to about 129 kb/d per month on average through to June 2026. For Kuwait, the figure is 25 kb/d per month on average for the six months to September 2025 only. In aggregate, these cuts average 305 kb/d, which, if adhered to fully, would more than offset the rate (137 kb/d per month) at which OPEC+ is unwinding its voluntary supply cuts over the same period. This would lead to a tighter rather than looser market, helping to minimize global inventory builds resulting from the expected slowdown in oil demand growth.
China: PBoC leaves rates stable again. As expected, the People’s Bank of China (PBoC) left interest rates on hold for the sixth month in a row, keeping the one-year loan prime rate (LPR) at 3.1% and the five-year LPR – the benchmark for mortgage rates – at 3.6%. The decision may have been influenced by the ongoing trade war with the US and the likelihood that a rate cut would put pressure on the yuan. That said, a future rate cut should be expected given that the PBoC did pledge an "appropriately loose" monetary policy in 2025. The PBoC previously stated that it would only cut rates at the “appropriate time”, with China’s consensus-beating Q1 GDP growth (5.4% vs. 5.1% expected) and recovering property market giving the PBoC more flexibility to conduct monetary policy.
Global: Signs of progress, or lack of it, on US tariff deals and April PMI surveys key matters this week. Last week’s relative stability in equity markets may be tested again in the face of evolving updates on US tariff talks with several trade partners. In terms of data releases, in the US, the S&P Global Flash PMI for April will be out on Wednesday, and markets are keenly focused on assessing the impact of ongoing tariff-related uncertainty on business confidence. Durable goods orders in March (due on Thursday) are expected to rise by 1.8% m/m (consensus), extending gains to a third straight month. In the Eurozone, the HCOB Flash Composite PMI for April (due on Wednesday) is seen easing to 50.3 from 50.9 on a broad-based softening in manufacturing (expected at 47.9) and services (50.5) measures. In the UK, April’s S&P Global Flash PMIs are due on Wednesday, with consensus estimates indicating weaker readings of 44.1 from March’s 44.9 and 51 from 52.5 for manufacturing and services activities, respectively. Retail sales for March (due on Friday) are seen contracting slightly by 0.3% m/m following a solid 1% rise in February. In Japan, Jibun Bank Flash PMI indicators for April will be released on Wednesday and Tokyo CPI inflation for April is due on Friday, with the street estimate pointing to a higher core rate of 3.2% y/y versus March’s 2.4%.