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Daily Economic Update
11.02.2025Egypt: Headline inflation mostly unchanged at 24% in January. CPI inflation ticked down fractionally to 24.0% y/y in January from 24.1% in December of last year, with the month-on-month rise in prices relatively high at 1.5% in January up from 0.2% in December. The food & beverages component reversed trend with prices up by 1.8% m/m in January (versus declines of 1.5% and 1.9% in the previous two months), though this in our opinion is mainly driven by seasonal factors relating to stockpiling ahead of Ramadan. Healthcare services also showed a strong rise in prices of 4.8% on a monthly basis. On the core inflation front, monthly levels stood at 1.7% in January bringing the yearly rate to 22.6% versus 23.2% in December. We reiterate our view that headline inflation will fall sharply to 13-14% in February on the back of a favorable base effect. This should provide the Central Bank of Egypt with sufficient cause to start cutting interest rates at one of its next two meetings (February and April), from the current high level of 27.75% (mid-point).
US: Trump confirms 25% import tariffs on steel and aluminum, to take effect from March 4. President Trump, as he had stated on Sunday night, levied new 25% tariffs on all steel and aluminum imports, including from its main suppliers such as Canada and Mexico. In data news, consumers’ inflation expectations in January for one-year and three-year horizons held steady at 3%, according to a New York Fed survey. However, they rose on a five-year ahead basis to 3% from 2.7% in December. Still, these outlooks are more moderate than the previously reported University of Michigan survey, which saw next-year inflation expectations rising steeply on tariff worries. Consumers’ views on the labor market were mixed, with expectations of slightly higher income growth and better chances of finding new employment if made redundant but a higher probability of losing the current job. Meanwhile, views on household finances also varied, with a lower probability of missing minimum debt payments over the next three months and somewhat easier access to credit but a marginal worsening in the overall household financial situation.
China: Marriages plunge 20% in 2024 further stoking demographic concerns. According to media reports quoting official Ministry of Civil Affairs statistics, the number of marriages slipped 20% in 2024 to 6.1 million from 7.7 million in 2023, underscoring concerns over a demographic crisis looming over the world’s second-largest economy. The figure marks the fewest marriages since the late 1980’s and likely heralds lower birth figures going forward. Despite the government’s efforts to boost the birth rate, China’s population continues to shrink. The population dropped for the third consecutive year in 2024 by 1.4 million to 1.41 billion. The continued fall in the population underscores an ongoing long-term structural risk for the economy as a shrinking workforce puts a strain on domestic demand.
Japan: Debt climbs to record JPY1,317 trillion by end-2024. Ministry of Finance data showed that outstanding government debt rose to JPY1,317 trillion by end-December 2024 (221% of estimated GDP), swelling by JPY7.2 trillion from September. This increase reflects mainly the supplementary budget (JPY13.9 trillion, $90 billion) passed last December to finance a new economic package, including inflation relief steps and disaster reconstruction costs, which was partially covered by bond issuance with total Japanese government bonds rising to JPY1,071 trillion mainly on higher issuance of long-term bonds. The upcoming budget for FY2025, which was approved in late December, has estimated a decline in JGB issuance of 19% to JPY28.6 trillion, falling below the JPY30 trillion threshold for the first time in 17 years, partly due to the reversal of temporary tax cuts implemented in FY2024.