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Daily Economic Update
28.09.2025US: Q2 growth revised sharply higher while jobless claims dipped, raising the question whether any monetary easing by the Fed is needed. The US economy rebounded more strongly than previously believed as growth for Q2 was revised sharply higher to 3.8% (annualized) from an earlier estimate of 3.3%, after it fell 0.6% in Q1 on trade volatility. The underlying driver, final sales to private domestic purchasers (household and business spending), increased at a more solid pace of 2.9% than 1.9% in the previous estimate as well as in Q1. The momentum seems to have continued in Q3 so far, with real personal sending growth in August broadly unchanged at a solid 0.4% m/m. Business confidence also showed signs of improvement as durable goods orders unexpectedly rose by 2.9% m/m following a drop of 2.7% in July, with core capital goods orders (non-defense excluding aircraft) increasing by 0.6%, building on a 0.8% rise in July. On the labor market front, initial weekly jobless claims surprisingly eased to a nine-week low of 218K (w/e Sep 20) from 232K in the previous week, with continuing claims (w/e Sep 13) also falling slightly to a 16-week low but still-elevated level of 1.93mn. All this suggests that the economy continues to power ahead with GDP growth seen potentially above 3% in Q3. Given this resilient growth, coupled with peak tariff uncertainty behind us indicating that demand for labor should be improving while weakness in the labor supply will not be helped by rate cuts, the question is: does the Fed need to further stimulate the economy, especially with inflation easily above target? PCE inflation in August rose to 2.7% y/y (0.3% m/m) from July’s 2.6% (0.2% m/m), with core inflation elevated at a six-month high of 2.9% y/y (0.2% m/m), in line with the consensus forecasts. A robust underlying economy but rising inflation saw the market cut back on its expectations of further interest rate cuts; although it continues to price in two 25-bps cuts by the end of 2025 (the same as median FOMC dot-plot projections), but with lower probability of around 65% versus over 80% at one point. Separately, on tariffs, President Trump announced 100% duties on imports of branded/patented pharma products, 25% on heavy trucks, 50% on kitchen and bathroom fittings, and 30% on some furniture, effective October 1. However, there will be wide exemptions for pharma companies building manufacturing units in the US.
Japan: Tokyo inflation steady in September. Consumer price inflation in Tokyo stood at 2.5% y/y for the second consecutive month, helped by temporary subsidies remaining in place. Meanwhile, core inflation (excluding fresh food) came in below consensus expectations of 2.8% y/y, at an unchanged 2.5% y/y for the second month in a row, while the core-core measure (excluding fresh food and energy), ticked down from 3% in August to 2.5% in September. While inflation readings remain above the BoJ’s 2% target both in Tokyo and nationally, the widely below expectations September core measure in Tokyo and the sharp fall in the core-core measure are noteworthy developments, especially if they will be mirrored in country-wide inflation measures.
Kuwait: Household credit growth solid for the second straight month. Domestic credit increased by a robust 0.6% in August, driving up YTD growth to 6.3% (7.7% y/y). Growth in August remained broad-based with household credit recording a solid increase for the second straight month, business credit still inching up, and lending to banks/financial institutions continuing to power ahead. Unsurprising given seasonal trends, business credit growth softened to 0.2% in August, driving up YTD growth to 4.9% (5.7% y/y). Growth in August was pulled down by a relatively big drop (-1.3% m/m) in ‘trade’ with also ‘construction’ remaining broadly muted. On a YTD basis, ‘other services’ (+7.8%) and ‘industry’ (+6.6%) are the fastest growing. After solid growth in July, household credit remained resilient in August (+0.5%), pushing the YTD increase to 2.5% (3.8% y/y). As we have written before, in both 2023 and 2024, household credit growth was much stronger in the second half of the year than in the first half, and the expansion in July/August is indicating that this is looking to be the case in 2025 as well. Lending to banks and financial institutions had another strong month and is up by a sky-high 32% YTD (KD 708 million). Despite this sector’s small relative size (5.6% of domestic credit), it has accounted for 23% of the total YTD increase in credit. Meanwhile, driven by a sharp jump (+13% m/m) in the volatile public sector deposits, resident deposits increased by a strong 2% in August, pushing YTD growth to 3.9% (4.9% y/y). The growth in private-sector deposits is slightly higher at 4.2% YTD while government deposits continue to be a big drag, falling by 12% YTD.
Saudi: Rental prices in Riyadh frozen for five years in new regulations to stabilize the housing market. Crown Prince Mohammad Bin Salman through royal decree directed the General Real Estate Authority to freeze rental prices for residential and commercial properties in Riyadh for up to five years effective 25 September. The law applies to both new and existing contracts, and the freeze could be extended to other cities in the Kingdom upon the approval of the Council for Economic and Development Affairs. The move is intended to address increasing concern about affordability and sustainability amid an inflationary surge in prices sparked by rapid economic progress and internal migration (250,000 Saudi nationals relocated to Riyadh in the last five years, according to Knight Frank property agents). Rental prices have increased by 30-40% over the last 2-3 years, while the purchase prices for apartments and villas have risen by 82% and 50%, respectively, in six years from 2019, according to Knight Frank. The Crown Prince has been concerned about the situation, and how soaring prices could complicate his aim under the Saudi Vision 2030 umbrella to raise home ownership levels to 70% by 2030, ordering in March a review and strategy to stabilize the market. He has promised to “rebalance the sector, reduce costs, encourage real estate development and provide diverse housing options for citizens and investors”.
UAE: Abu Dhabi launches AED 106 billion housing expansion initiative. The UAE president has inaugurated a series of agreements to construct 13 new residential communities across Abu Dhabi with a total cost of AED 106 billion ($28.9 billion), providing about 40K housing units for citizens across Abu Dhabi City (six integrated communities with around 14.4K housing units at AED 55 billion), Al Ain (five integrated communities with around 10.5K housing units at AED 37 billion), and Al Dhafra. The projects will be supervised by the Abu Dhabi Housing Authority in collaboration with the Abu Dhabi Projects and Infrastructure Centre and executed by leading developers such as Aldar Properties and Bloom Holding. Around 25K housing units will be completed within five years while close to 15K plots will be made available through a map-based reservation system, ensuring transparency and choice for citizens. This initiative confirms the government’s commitment to enhance family well-being, social cohesion, and long-term sustainability. Meanwhile, the Abu Dhabi government raised $3 billion in dual tranche bonds with the three-year tranche ($1 billion) priced at 10 bps above US treasuries while the 10-year tranche ($2 billion) was priced at 18 bps above US treasuries.