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Daily Economic Update
16.04.2025Oil: IEA cuts oil demand growth forecast on deteriorating economic outlook. The International Energy Agency slashed its global oil demand forecast for this year by 300 kb/d to 730 kb/d y/y, the slowest rate since pandemic-affected 2020, on deteriorating trade tensions and a worsening global macroeconomic outlook. Roughly half of the downgrade is due to downward revisions to oil consumption in the US and China, as the world’s largest two economies engage in tit-for-tat tariff escalation. This comes despite a robust 1.2 mb/d y/y increase in oil demand in Q1 2025, the fastest since 2023, and as global oil stocks hovered near the bottom of the five-year range in February. In terms of oil supply, growth is downwardly revised for this year by 260 kb/d to 1.2 mb/d on lower US and Venezuelan output, as subdued oil prices and higher raw material costs (e.g. steel) due to tariffs negatively impact production growth in the former. The market will, nevertheless, be characterized by oversupply both this year and next, as demand growth is seen slowing further to 690 kb/d y/y in 2026 amid a fragile macroeconomic landscape and increased penetration of electrical vehicles, while supply is projected to grow at a healthy 960 kb/d y/y.
China: GDP growth exceeds expectations as key figures improve. Ahead of a now full-blown trade war with the US, China’s GDP grew by 5.4% y/y in Q1, matching the previous quarter’s figure and beating consensus estimates of a 5.1% rise. The country’s March retail sales and industrial production also beat expectations by a wide margin, increasing by 5.9% y/y and 7.7% respectively, the fastest pace in nearly four years for the latter. Although these figures are positive, they could also be partially supported by pre-tariff front-loading. Earlier reports had shown Chinese exports rising 12.4% y/y in March, significantly above market expectations of a 4.4% rise. Elsewhere, China’s new house prices decreased 4.5% y/y in March, extending the country’s property market decline but at a softer pace for the fifth consecutive month after hitting a -5.9% trough in October 2024 as the government continues to support the sector.
UK: Payrolls decline sharply but unemployment rate steady and wage growth elevated. UK payrolls (based on employment tax records) fell by 78K in March (the biggest monthly decline since May 2020) from a downwardly revised drop of 8K in February, according to preliminary data from the ONS. Overall employment levels are now lowest since November 2023. However, the unemployment rate was unchanged for the fourth straight period at 4.4% in Dec-Feb, and job vacancies fell to 781K in the Jan-Mar period, their lowest since Mar-May 2021. Meanwhile, wage growth in Dec-Feb remained elevated, with slightly accelerating regular pay growth (excluding bonuses) of 5.9% y/y from 5.8% in Nov-Jan and flat total pay growth (including bonuses) of 5.6%. A sudden reversal in payroll gains suggests that some signs of optimism seen earlier in the labor market may be dissipating as indicated in recent business surveys, with US tariff-related uncertainty and government spending cuts also weighing on business confidence. Additionally, still-high wage growth and expectations of higher inflation over the coming months will likely constrain the Bank of England in cutting interest rates aggressively in order to support the economy.
Saudi Arabia: Inflation hits 20-month high in March. Consumer price inflation accelerated to 2.3% y/y in March, the highest since July 2023 from 2% the previous month, and just exceeding market expectations of 2.2%. The increase was driven mainly by higher inflation in food and beverages (2% from 1% in February) recreation and culture (0.3% from -1.1%), and restaurants and hotels (1.3% from 0.8%). Moreover, transport costs fell at a slower rate (-0.8% from -1.5%) as well as softer deflation in communications (-1.4 % from -1.8%). In contrast, inflation eased but remained high for housing and utilities (6.9% versus 7.1%), with housing rents inflation falling to 8.2%, the lowest since January 2023, while deflation increased for furnishings and household goods (-2.6% from -2.5%). On a monthly basis, consumer prices rose by 0.3% in March after a 0.2% increase in the previous month.