Daily Economic Update

US: April CPI inflation lower than expected as the S&P 500 recovered its YTD loss. CPI inflation in April came in lower than expected, softening to 2.3% y/y (0.2% m/m) from 2.4% in March, the lowest annual rate in more than four years. The core rate also increased a lower-than-expected 0.2% m/m, keeping the y/y rate steady at 2.8%. We note that this is the third consecutive month in which inflation comes lower than expected. Shelter continued to be the biggest driver of inflation, rising 0.3% m/m (4% y/y) and accounting for more than half of the overall monthly increase in the CPI. Excluding shelter, headline and core inflation would drop to 1.4% and 1.8% y/y, respectively, below the Fed’s 2% inflation target. Higher tariffs have yet to show in the inflation data, but that might change starting with the May inflation print. However, merchandise imports to the US have soared by 25% y/y in Q1 as companies front-run higher tariffs, which may delay even further the rise in inflation. In addition, the expected weakening in economic activities and the lower oil prices are forces that will soften the expected increase in inflation. The soft inflation print helped the S&P 500 reverse early losses in the futures market, ending the day up 0.7%. Given the ongoing tariff de-escalation, the S&P 500 has now recovered all its YTD losses, having rallied by 18% since 8 April. Meanwhile, US bond yields continued to creep higher, likely reflecting diminishing US recession risks. Finally, the White House in an official statement touted that President Trump secured $600 billion in deals and investments from Saudi Arabia (with the figure later upped to $1 trillion as per comments from Trump and the Saudi Crown Prince), but with little information on the details and the composition of these investments (see below).

Chart 1: US inflation (% y/y) Source: Haver

UK: Soft labor data as payrolls dropped again, unemployment rate ticked up, and vacancies fell. UK payrolls (based on employment tax records) fell for the third straight month, down by 33K in April, following a drop of 47K (downwardly revised from 78K) in March, according to preliminary data from the ONS. Overall employment levels are now lower by 106K (0.3%) than the same month last year. Moreover, the unemployment rate inched up to 4.5% in the January-March period (from 4.4% in December-February), the highest rate in nearly four years. In addition, job vacancies continued to fall, to 761K in the February-April period, the lowest level in four years. Meanwhile, wage growth softened in the January-March period, with regular pay growth (excluding bonuses) down to 5.6% y/y from 5.9% in December-February and total pay growth (including bonuses) down to 5.5% from 5.7%, respectively. This soft labor data tallies with the recent weakness in the PMI, which fell below 50 in April (to 48.5 from 51.5 in March) for the first time since October 2023, driven by the services sector. The general tariff-related uncertainty has likely contributed to the recent softness while the recent agreement with the US on a trade framework should help boost confidence levels somehow.

Saudi Arabia: Commits to invest at least $600 billion in the US. Saudi Arabia pledged to invest $600 billion (figure seemingly upped to $1 trillion later) to procure US goods and services, including $142 billion in military equipment, as well as investments in healthcare, aviation, energy, and AI infrastructure. According to media sources, Humain, which is owned by the Public Investment Fund, will partner with US tech firm Global AI to gain access to data centers in the US and, eventually, a facility in Saudi Arabia, while Nvidia and Advanced Micro Devices will provide the necessary semiconductors. Additionally, the PIF is set to order around 30 Boeing aircrafts for leasing company Avilease. The investment timeline is unclear, some sources mentioned an investment period of five years. Also, taking advantage of President Trump’s visit, Saudi Aramco announced $3.4 billion worth of investments in its Texas-based Motiva refinery, the largest in the US. Apart from a pledge to integrate petrochemicals production in the refinery, it was not clear whether the refinery will expand crude processing capacity itself, which would be important as a sign of confidence in the longer-term oil demand outlook.

Download Full Report >