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Daily Economic Update
07.07.2025Kuwait: Real estate sales rebound in Q2, led by the investment segment. Real estate sales ticked down only slightly in June to KD352 million, a 4.1% drop from May’s solid performance. Sales were up in year-on-year terms by 14.2%, mainly on another good month for the investment (i.e. apartment) sector, where sales rose by 53% y/y to KD164 million. Residential sales stood at KD114 million, with growth slowing to 7.1% y/y from 17.7% in May, while commercial sector sales registered a solid KD74 million, but were still down 22% y/y from a strong base a year earlier. On a quarterly basis, real estate sales stood at an upbeat KD1,005 million, rebounding 27% q/q from a Q1 that was likely weakened by seasonal factors. Notably, investment sector sales in Q2 surpassed those in the residential segment for the first time since Q4 2018; a strong rise in investment sales came despite only a small rise in the volume of transactions, suggesting rising prices due to growing demand. Taken together, sales in the property market over the Q1 and Q2 periods point to a continuation of the broad improvement in overall market activity witnessed through 2024, with the investment segment leading the way while the residential market – which has been struggling against affordability issues – lags behind. We expect this overall trend to be broadly sustained through H2 2025, against a backdrop of steady growth in the non-oil economy, potential interest rate cuts and anticipation of a new housing finance law which could breathe further life into the market.
Oil: OPEC+ 8 agrees to larger-than-expected output hike. In a meeting that was moved forward by one day to Saturday, the OPEC-8 group announced that given “steady global economic outlook” and “low oil inventories” it would accelerate the pace of market resupply to 548 kb/d in August, bringing the cumulative increase to 1.9 mb/d since the initial rollback of the cuts in April. With the latest announcement, the earlier 2.2 mb/d in voluntary production cuts are now on track to being fully unwound by September, one year ahead of schedule, with the UAE’s 300 kb/d capacity-related adjustment also fully introduced. Actual production increases have thus far been limited, however. Across April and May, OPEC-8 output only rose by 169 kb/d compared to a rise in quotas of 548 kb/d, according to OPEC secondary sources, as Iraq and Russia tailored production to comply more with the compensatory cuts while Kazakhstan continued to produce significantly above its quota. With the recent voluntary cuts assumed to be fully rolled back by September (OPEC-8 next meets on August 3), the market’s focus will shift to the other cut tranches including the 2 mb/d OPEC+ production cut undertaken in November 2022 as well as the first set of voluntary cuts (1.66 mb/d) implemented in May 2023, both of which are in place until December 2026. The announcement of the larger-than-expected output hike for August weighed on Brent futures, which slipped 0.7% to $67.8/bbl in early Asian trading this morning having settled up 0.8% last week on news that Iran suspended cooperation with the IAEA.
US: Treasury Secretary says that original “reciprocal” tariff rates to be re-instated in the absence of trade agreements. While President Trump had already mentioned that, in the absence of reaching trade agreements, he will start sending letters to countries indicating tariff rates that will start to be paid on 1 August, Treasury Secretary Scott Bessent clarified yesterday that the tariff rates will be the same “reciprocal” rates that were announced on April 2. As a reminder, these “reciprocal” tariffs were high, exceeded the market’s expectation by a wide margin, were based on an arbitrary formula, and led to a crash in the US stock market. However, the specifying of a new date (August 1 as opposed to July 9) when these tariffs will start to accrue is effectively extending the pause on these “reciprocal” tariffs for another three weeks, giving more time for negotiations with trading partners. Bessent also mentioned that he expects “several big announcements over the next couple of days” related to trade agreements. We note that what would matter most to the US’s trade dynamics are developments with the country’s top trading partners. Specifically, the top 10 trading partners (the EU, Mexico, Canada, China, Japan, South Korea, Taiwan, Vietnam, UK, and India) accounted for more than 80% of merchandise imports into the US in 2024 and 93% of the merchandise trade deficit. Hence, when letters will start to be sent out (today as per Trump), or any trade agreements announced, it will be important to keep an eye on the size of the trading relationship between the respective country and the US.
Global: Tariff and trade developments the key issue this week. Tariff/trade developments in view of the effective delay of the deadline for when reciprocal tariffs will be re-instated, is the most important issue this week. Letters, indicating tariff rates for imports into the US, for different countries are supposed to start going out from today. In terms of data releases, in the US, weekly jobless claims (due on Thursday) are again a key thing to monitor given the high level of continuous claims recently. In addition, FOMC minutes for the June meeting will be released on Wednesday. In the Eurozone, May’s retail sales are due later today with consensus estimates pointing to a 0.7% m/m decrease, a reversal from April’s 0.1% increase. In the UK, following a weaker-than-expected GDP print for April (-0.3% m/m), the market will be looking for May’s data this Friday. In China, June’s inflation is due on Wednesday with consensus expecting a 0% y/y reading, ending a four-month streak of negative inflation figures. Finally in Japan, producer prices for June will be released on Thursday with the consensus projecting a softer increase of 2.9% y/y, down from 3.2% in May.