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Daily Economic Update
19.03.2025Japan: BoJ keeps interest rates steady amid rising uncertainties. As widely expected, the Bank of Japan (BoJ), in a unanimous vote, kept the policy rate unchanged at “around 0.5%”, citing growing uncertainties related to US trade policies, which could adversely affect Japan's export-driven economy. Moreover, the subdued recovery in private consumption likely due to cost-push inflationary pressures as well as weak housing and public investment were other key factors. We note that the results of the spring wage negotiations remain a key factor for the BoJ’s decisions on interest rates in the coming months. As we stand, the negotiations are expected to yield another big pay increase this year. The market still expects one-to-two interest rate hikes before the end of the year.
Eurozone: Germany’s parliament passes key debt reform bill. In a historic move, Germany’s Bundestag, the lower house of parliament, approved in a 513-to-207 vote the debt reform bill. The bill exempts spending on defense and security from Germany's strict debt rules and creates a €500bn infrastructure fund. That said, the bill still needs to pass through a two-thirds majority in the Bundesrat, Germany's upper house of parliament, representing the country's states, in order to become law; the upper house will vote on that bill in a session on Friday. On the data front, the Eurozone’s merchandise trade surplus fell to just €1.0 billion in January, significantly lower than December’s €15.4 billion surplus and consensus expectations of €14 billion. The 3% y/y rise in exports was offset by a 7.6% increase in imports putting the surplus at close to a two-year low. However, the European Union’s trade surplus with the US rose to €16.2 billion in January compared with €15.4 billion in December (€11.9 billion in January 2024), which may be, at least partially, driven by tariff front-running in the US.
US: Industrial production strengthens, but housing construction indicators mixed. Growth in industrial production in February surprisingly picked up to 0.7% m/m (1.4% y/y) from a downwardly-revised 0.3% in January on a solid 8.5% m/m jump in auto production, which recovered from a 5.3% contraction in January. However, the momentum may encounter headwinds over the coming months amid tariff-driven higher input costs and broader uncertainty about government policies. Meanwhile, residential construction in February rebounded sharply, with housing starts climbing 11% m/m after unfavorable weather conditions drove a similar decrease in January. However, signaling weakness ahead, building permits fell 1.2% m/m in February, deepening the slump to three straight months. We believe that overall US housing construction activity could see further softness driven by a rise in building material costs on higher tariffs and ongoing crackdown on illegal immigrant construction workers.
UAE: Dubai’s real estate sales continued to strengthen. Growth in real estate sales accelerated in February to a robust 40% y/y, the highest since August 2024, to stand at AED 51 billion ($13.9 billion). First sales, which include off-plan sales, surged by 40% y/y to AED 32 billion, constituting more than half of total sales with apartments’ (AED13.9 billion; 24% y/y) and villas’ (AED13.3 billion; 183% y/y) sales accounting for the majority of this segment. On the other hand, the resale segment saw a 39% increase to AE19.4 billion, with transaction volumes up 15%. Wadi Al-Safa 5, Jumeirah Village Circle, Dubai Marina, and Business Bay remain the top performing areas, attracting stronger demand compared to other regions. The demand for real estate in Dubai is expected to remain solid in 2025, supported by the prospects of lower interest rates, government initiatives that included reforms to the property law as well as relaxed visa and tax incentives, limited supply within the ultra-luxury segment, and the steady influx of high-net-worth individuals.
Qatar: Fitch affirms the sovereign rating at “AA” with a stable outlook. Fitch Ratings affirmed Qatar’s sovereign credit rating at “AA” with a stable outlook, supported by expanding liquified natural gas (LNG) production capacity, which will augment both hydrocarbon and non-hydrocarbon GDP growth and strengthen the public finances. The North Field expansion projects are set to boost LNG production capacity from the current 77 million tonnes per annum (mtpa) to 126 mtpa by end-2027, and up to 142 mtpa by end-2030, nearly doubling the existing capacity. The higher hydrocarbon receipts will also help reduce the debt-to-GDP ratio as the government deploys fiscal surpluses to pay down loans. Risks to the outlook are mainly linked to regional geopolitical uncertainty.