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Daily Economic Update
15.07.2025China: GDP growth in Q2 beats estimates putting the country in a good spot to achieve the full-year growth target. Helped by solid export growth and despite weak domestic demand, GDP grew by 5.2% y/y in Q2, beating estimates (5.1%) and the government’s full-year growth target of 5%, but below Q1’s growth of 5.4%. For the first half of the year, GDP is up by 5.3%, putting the government in a good spot, at least for now, towards achieving its growth target for the full year. Earlier data had shown that exports climbed by 5.9% y/y in H1 while imports fell by 3.9%, giving a solid boost to GDP. In other data, retail sales increased by a much lower-than-expected 4.8% y/y in June, down from 6.4% in May, and the weakest since February, indicating that domestic demand remains fragile despite the government subsidy program. In contrast, industrial production beat estimates by a wide margin, expanding by 6.8% y/y, up from 5.8% in May. Meanwhile, new home prices fell by 0.3% m/m, wider than the 0.2% drop seen in May. However, the y/y drop softened for the eighth straight month, down 3.2% through June (-3.5% in May), the smallest fall since April 2024. Overall, the resilience in headline economic growth gives the government and central bank some breathing room to hold off extending any urgent policy support to the economy. Looking ahead, more needs to be done to invigorate weak domestic demand and arrest the decline in house prices while the fate of the trade truce with the US, which is set to end in mid-August, will be key in shaping the outlook for the remainder of the year.
Oil: Prices fall as market shrugs off Trump’s Russia tariff threat. Brent futures fell 1.6% yesterday to settle at $69.2/bbl as Trump’s “major announcement” on Russia delivered a softer threat to Russian oil supply than the market had expected. In the announcement, Trump threatened 100% “secondary tariffs” if Russia does not reach a peace deal with Ukraine within 50 days. The secondary tariff threat would translate to a 100% US tariff on the largest buyers of Russian oil: India, China, and Turkey. While largely discounted by the market as a low-probability scenario, secondary tariffs will nevertheless have a severe impact on the global market balances if they do materialize. Russia’s crude and petroleum products exports stood at more than 7 mb/d in June, according to IEA data, the loss of which will push the oil market into a deficit with OPEC+ producers unable to plug the gap and leading to a massive spike in prices. Given Trump’s affinity for lower oil prices as well as the severe ramifications of a 100% tariff on China and India, the likelihood of this scenario playing out is extremely low in our opinion.
Japan: The Bank of Japan to likely revise its core inflation forecast higher. The BoJ will likely revise its core inflation forecast upward in its upcoming forecast update, to be released following its monetary policy meeting on July 31. This likely adjustment to the core inflation forecast for FY2025 (from the current 2.2% forecast) stems from stronger-than-expected rises in rice and food prices, which have sharply accelerated recently and helped push core inflation to 3.7% y/y through May. The doubling of rice prices over the past year and the geopolitical tensions in the Middle East are compelling the BoJ to reassess its near-term inflation trajectory. Despite this, the bank is likely to keep its benchmark interest rate steady at 0.5%, maintaining its broader view that inflation will align with its target over the medium term, barring major shocks including from US tariff policies. In addition, the upcoming upper house election may have further complicated the BoJ's efforts to continue normalizing monetary policy. A shift in the political tides may also lead to additional fiscal stimulus, risking upward pressure on bond yields and inflation and adding another layer of uncertainty for the BoJ.
UAE: Dubai’s real estate sales in June softened from May’s historical peak. Real estate sales softened to AED 55 billion ($14.9 billion, +20% y/y) in June, down from a record high in May (AED 67 billion) according to DXB interact. Apartment sales, which constitute almost half of total sales, rose by 21% y/y to AED 25 billion, supported by the strong increase in first sales of AED 18 billion (first sales also include off-plan sales). In contrast, villa sales fell by 2.7% to reach AED 19 billion due to a drop in the first-sale market (-7.1%). In addition, growth in plot sales softened from May’s 63% surge to 4.9% in June. The Jumeirah Village Circle, Business Bay, and Dubai Investment Park 2 remained the top performing areas in June. Dubai's property market has benefited from government-led initiatives that included residency permits for retired and remote workers, expansion of the 10-year golden visa program, and the first-time homebuyer initiative launched by the Dubai Land Department. These initiatives are expected to continue supporting demand over the medium term. However, the expected handover of more than 72k units this year, up from a six- year low of 27k in 2024 according to a report from “ValuStrat”, a consultancy, could help in stabilizing the double-digit increases seen in prices and rents since early 2023.