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Daily Economic Update
18.06.2025US: Retail sales decline more than forecast but underlying performance stronger. US retail sales in May fell 0.9% m/m after a downwardly revised 0.1% drop (+0.1% in the first estimate) in April driven by a 3.5% decline in auto sales. On an annual basis, retail sales growth slowed to 3.3% from 5% in April. However, on a brighter note, a narrow measure of sales (excluding food services, auto, gasoline, and building supplies sales) linked to goods spending in GDP rebounded by 0.4% m/m and April’s figure was revised slightly higher, indicating that underlying economic growth is stronger than headline retail sales growth figures. Meanwhile, industrial production in May unexpectedly declined 0.2% m/m following a revised 0.1% increase in April, but manufacturing output rose 0.1%, mainly helped by a 4.9% jump in auto production. Annually, the growth in industrial production slowed to 0.6% from April’s 1.4%. Chaotic tariff rollouts have disrupted the spending pattern of businesses and households, and therefore, the trajectory of economic data may remain volatile over the coming months.
Oil: Prices rise on sharp Trump rhetoric; IEA sees oil demand growth slowing. Brent futures rallied 4.4% d/d to settle at $76.5/bbl given the ongoing escalation in the Israel-Iran war and following comments from US President Trump including that he “is not in the mood” to negotiate with Iran and that Iran should surrender unconditionally. So far in the conflict, major oil and gas infrastructure has been spared and there has not been yet any disruption to oil flows from the Hormuz Strait either. In its monthly oil market report, the International Energy Agency stated that the outlook for the oil market this year, barring any curtailment of Iranian crude, remains one of oversupply as OPEC+ continues to hike output while demand growth struggles in the face of macroeconomic headwinds. Indeed, the agency sees global oil supply rising by 1.8 mb/d in 2025 and by 1.1 mb/d in 2026, both on the back of robust increases in non-OPEC+ output. Meanwhile, oil demand growth, challenged by slower macroeconomic activity, global trade tensions, and uptake of cleaner energy, was revised down by 20 kb/d for both this year and next, and is now seen rising by 720 kb/d and 740 kb/d, respectively. The IEA also published yesterday its “Oil 2025” report, an annual publication that looks at longer-term trends in the oil market, to 2030. Here, the IEA is projecting that annual demand growth will continue to slow through the forecast period, averaging below 400 kb/d per annum during 2025-2030, and actually turning negative in 2030 (-100 kb/d). This “trickle” will result in overall global oil demand peaking at 105.6 mb/d in 2029. Non-OECD economies will account for all of the growth in oil demand (+4.2 mb/d), eclipsing a 1.7 mb/d decline in OECD countries, though notably, demand is now seen plateauing in China at 16.8 mb/d through 2030 but offset by growth in India and a softer decline in the US. At the oil products level, higher LPG/Ethane (for petrochemicals) and Jet/Kerosene will drive growth, while gasoline consumption is expected to peak this year. On the supply side, global oil production capacity is set to rise by 5.1 mb/d to 114.7 mb/d by 2030, significantly outpacing demand growth. Most of the gains in capacity will be front-loaded and roughly two thirds will come from non-OPEC+ producers, with upstream investments waning after 2028 amid a lower oil price environment.
Japan: Merchandise trade deficit widened in May. The merchandise trade deficit widened in May to JPY638 billion, from JPY116 billion in April. Exports fell by a narrower-than-expected 1.7% y/y compared with April’s 2.0% increase, marking the first decline since September 2024. The drop was mainly due to lower exports to the US, which fell by 11% y/y on weaker exports of cars, auto parts, and chip-making machinery. Similarly, exports to China shrank by 8.8%. On the other hand, imports dropped by 7.7% y/y mainly on lower mineral fuels (-21%) and iron ore (-33%). The impact of the sweeping US tariffs on the Japanese economy is becoming more evident. During the G7 summit in Canada, the Japanese prime minister met with the US president but the meeting was not fruitful and no trade deal was reached, although both sides agreed to continue talks at the ministerial level.