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Daily Economic Update
04.06.2025US: Job openings unexpectedly increase and 50% duties on steel and aluminum imports now effective. Job openings (JOLTS report) in April surprisingly rose to 7.4 million from 7.2 million in March, indicating that the job market has remained relatively resilient despite tariff-driven policy flip-flops. However, details were more mixed, with a slight drop in the quits rate to 2% from 2.1% in March and an uptick in the layoffs rate to 1.1% from 1.0% but a rising hiring rate (3.5% from 3.4%). As a reminder, non-farm payroll data for May will be released this Friday, with consensus estimates of 130K job gains, down from April’s 177K. Meanwhile, the previously-announced doubling of duties (to 50% from 25% earlier) on steel and aluminum imports became effective this morning. However, providing a partial reprieve for the UK, its exports to the US will still be subject to a 25% US tariff rate until details of the previously agreed trade framework between the two countries is finalized (but may rise to 50% in case of any non-compliance). These sectoral tariffs remain unaffected by the recent US court ruling blocking sweeping ‘reciprocal’ levies as they are enacted through a different legal mechanism.
Eurozone: Inflation cools more than forecast ahead of ECB interest rate decision. Consumer price inflation came in lower than expected in May, falling to 1.9% y/y from 2.2% the previous month. This marks the first time since September 2024 that inflation is back below the ECB’s 2.0% target. Similarly, core inflation decreased from 2.7% y/y in April to 2.3% in May, softer than consensus expectations of 2.5%. Meanwhile, services inflation fell to 3.2% y/y, its lowest figure in over three years and significantly below the previous month’s 4%. May’s milder inflation report, which was largely broad-based, is expected to reinforce the case for an interest rate cut at the ECB’s policy decision this Thursday, with the market overwhelmingly expecting a 25 bps reduction that would bring the deposit rate down to 2%.
Japan: The Bank of Japan (BoJ) to continue tapering its bond purchases amid rising yields. BoJ governor Kazuo Ueda, signaled the likelihood of continuing reductions in bond purchases beyond the current fiscal year. During his parliamentary remarks, Ueda noted broad support for further tapering from market participants, though he emphasized balancing predictability with flexibility. The BoJ, which began trimming bond purchases by JPY400 billion ($2.8 billion) per quarter last summer, owns roughly half the government’s debt. While a recent 10-year bond auction provided a momentary reprieve, with yields falling and the bid-to-cover ratio rising above last year’s average, confidence remains fragile ahead of the upcoming super-long 30-year bond auction on Thursday, which will test investor appetite under steepening yield curves and worries of fiscal strain. The BoJ’s 16-17 June meeting June could unveil the bank’s next steps and markets are keen on scrutinizing the central bank’s decision about the pace of bond purchases amid a sharp upward shift in the yield curve for government bonds, with yields on 30Y bonds hitting the highest on record recently.
UAE: Non-oil sector logs its softest expansion in nearly four years. The headline PMI resumed its downward trend in May, falling to 53.3 from 54.0 in April. The output sub-index declined to 57.3, the weakest in 44 months, and new order growth eased to a seven-month low of 56.2, while export orders were dampened by the adverse impact of geopolitical tensions and US tariffs and only marginally ticked up. Employment registered its quickest expansion pace in one year (51.6) amid solid demand. On the prices front, input prices continued to increase, though at a softer pace due to the modest rise in raw material prices and staffing costs, while output prices also increased for the fifth straight month. However, business optimism for future output eased to its lowest since January. Meanwhile, Dubai's non-oil sector maintained steady growth with a PMI reading of 52.9 in May, demonstrating improved demand momentum on the back of a four-month high rate of growth in new orders.
Qatar: Non-energy private sector activity improves in May. The non-energy private sector PMI edged up to 50.8 in May from 50.7 in April, remaining relatively soft compared to the series average (the performance in H1 2025 is expected to be the weakest since pandemic-affected 2020). Private sector employment rose at the third fastest pace in the series’ history, recovering from the slowdown seen in April and outweighing a contraction in output. New orders grew marginally, registering the second rise this year, mainly in wholesale & retail trade and services, with firms citing marketing efforts and an increase in the expatriate population as the main drivers. Wage inflation fell to a six-month low in May, though remained elevated and pushed overall input costs for firms higher for the second consecutive month. Nevertheless, output prices fell for the 10th consecutive month, linked mainly to discounting efforts, especially by service providers. While activity has remained relatively soft by historical standards, business sentiment strengthened in May on improving market conditions, activity in the real estate sector, and an increase in the expatriate population.