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Daily Economic Update
01.09.2025Oil: Prices rise for second straight week; OPEC-8 meeting in focus. Brent futures closed Friday up 0.6% w/w at $68.1/bbl (-8.7% ytd) as the US-brokered ceasefire talks between Russia and Ukraine ground to a halt, leading US President Trump to impose secondary tariffs on India for its purchases of Russian crude. Indeed, after Russia’s Foreign Minister Sergei Lavrov denied a meeting was going to take place between Putin and Zelensky, Trump also added that it was “unlikely” to happen. As the ceasefire talks continue to stall, it puts into focus Trump’s two-week deadline for Russia to make peace, which is due to pass at the end of this week. It is not clear what Trump intends, but further sanctions on Russia – directly or indirectly by targeting refiners in India or China that purchase Russian crude, are a possibility. Given Trump’s sensitivity to higher oil prices and domestic inflation, he may not want to increase the pressure on India so much that the country ceases purchases of all Russian crude, leaving 1.5 mb/d of Russian crude stranded and India with little choice but to bid for more costly crude elsewhere, thereby pushing up global prices. OPEC+ members meeting next Sunday to deliberate on production quotas for October and beyond – whether to begin unwinding the next tranche of supply cuts from 2023 (1.66 mb/d) or not – will be keeping a close eye on this and recent moves by the UK, France and Germany to re-impose UN sanctions on Iran for failing to reengage diplomatically on the country’s still-unclear nuclear enrichment program.
Global: US August jobs report and updates on Fed Governor Cook’s firing key events this week. Legal-related updates on Fed Governor Cook’s firing by President Trump last week, which has important implications for the Fed’s perceived independence, is a key matter that we might get developments on this week. Additionally, monitoring “Fed speak” is becoming increasingly important, with several FOMC participants (Musalem, Williams, Kashkari, Goolsbee) scheduled to speak this week. In terms of data releases, in the US, the August employment report (due on Friday) is the most critical release this week, with the street expecting slightly greater job gains of 78K (from July’s 73K) and a slight increase in the unemployment rate to 4.3% (from 4.2%). A weak jobs number should cement expectations of a rate cut in September while a relatively strong number would do the opposite. The ISM’s PMI gauges for manufacturing and services activities are due on Tuesday and Thursday, respectively. The expectations are for some improvement in both, to 48.6 and 50.5 in August from July’s 48 and 50.1, respectively. In the Eurozone, the inflation print for August is due on Tuesday with the headline rate seen unchanged at 2% y/y and the core rate down to 2.2% from 2.3% in July. Retail sales for July are due on Thursday and are expected to fall by 0.2% m/m following June’s 0.3% increase. In the UK, retail sales data for July is due on Friday and the consensus forecast points to slowing growth of 1.3% y/y (0.2% m/m) from 1.7% (0.9% m/m) in June. Finally in Japan, household spending for July is due on Friday, with the street expecting a 2.3% y/y increase up from 1.3% in June.
Saudi Arabia: Softer credit growth in July but still outpacing deposits. Total bank credit growth eased in July to 15.2% y/y (8.5% ytd), decelerating for the third consecutive month from a peak of 16.5% in April. The slowdown was mainly due to softer, albeit still strong, growth in private sector credit (13.9% y/y), which accounted for 93% of total lending. Personal loan growth remained solid at 8.4% y/y (from 8.2% in June), reflecting strong consumer demand thanks to an active non-oil sector and a healthy labor market. In contrast, residential new mortgage financing for individuals fell by 9.3% y/y (-38% ytd), the sharpest decline in over a year, and consistent with signs of softer activity and price action within the residential real estate sector, according to recent (Q2) real estate data. On the other hand, deposit growth strengthened to 8.4% y/y (from 7.7%), helped by government deposits (11% y/y), but remained well below credit growth. The loan-to-deposit ratio, therefore, rose to a new high of 112%, which illustrates the insufficiency of local deposits as a source of domestic low-cost funding. In parallel, net foreign assets fell deeper into negative territory amid ongoing demand for external funding. This trend will likely extend into coming months as the non-oil economy continues to expand and drive strong demand for credit, with liquidity risks mitigated by support from government deposits and efforts to recalibrate investment spending.
Egypt: Fifth and sixth reviews of the Extended Fund Facility (EFF) program due this month. A team from the IMF will likely head to Cairo in the second half of September for the fifth and sixth reviews of Egypt’s $8 billion loan program. If things go well, this will unlock the disbursement of a combined tranche of $2.5 billion. The IMF decided earlier in the fourth review to combine the fifth and sixth reviews to give the state more time to divest from and reduce its role in the local economy as well as advance its reform agenda. The IMF's primary consideration is to ensure Egypt's financing needs are met and that key economic indicators are improving.