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Daily Economic Update
09.09.2025Europe: French PM ousted, deepening political crisis. Yesterday, France’s fragile government collapsed after Prime Minister Francois Bayrou lost a confidence vote in the National Assembly by 364 votes to 194. Bayrou, appointed by President Macron in December last year had staked his survival on passing an austerity budget plan that envisaged deep spending cuts to get a handle on France’s soaring debt (114% of GDP in Q1 2025; fiscal deficit in 2024 at 5.8% of GDP). His gamble backfired, with lawmakers from both the left and the far right rejecting the plan and uniting to oust him. This was Macron’s third PM to be removed in less than a year, leaving him to begin another search amid a fragmented parliament that lacks a clear majority. The political turmoil stems from Macron’s 2024 decision to dissolve the National Assembly, which produced a splintered legislature and persistent gridlock. The collapse raises the risk of prolonged policy paralysis at a time when France faces fiscal stress, EU budget rules, and global instability. Yields on France’s long-term government bonds were already touching the highest levels since 2009. Furthermore, the political paralysis could lead to a downward revision of growth forecasts and credit ratings (Fitch is due to review France’s rating of AA- rating with negative outlook this week), exacerbating the weakening fiscal trajectory. That said, having anticipated the failed vote, financial markets were little changed on Monday.
US: Consumers’ year-ahead inflation expectations tick up and views about employment worsen. According to a New York Fed survey, consumers’ year-ahead inflation expectations ticked up to a three-month high of 3.2% in August from 3.1% in July, but still below the 3.6% level seen earlier this year during the peak tariff uncertainty. Also, such expectations remained steady for three-year-ahead and five-year-ahead horizons at 3% and 2.9%, respectively. However, consumers’ views about the labor market worsened as they expect more difficulty in finding a new job if made redundant (the worst reading since the start of the series in June 2013) and see the unemployment rate rising over the next 12 months. The US job market has shown signs of weakening in recent months, with monthly job gains nearly stalling and unemployment gradually rising. Moreover, weekly continuing jobless claims have been hovering at near four-year high levels, suggesting worsening prospects of finding a new role. Amid loosening job conditions, markets expect the Fed to resume its easing cycle at next week’s FOMC meeting with a 25-bps cut in interest rates.
Japan: GDP revised up for Q2 on higher private consumption. The second preliminary estimate for GDP growth in Q2 2025 indicates a more robust expansion than initially reported, with output revised up by 0.5% q/q compared to the earlier estimate of 0.3% (2.2% annualized versus 1% in the initial estimate). The upward revision was primarily driven by stronger-than-expected private consumption, which advanced by 0.4% q/q, up from the previously estimated 0.2%. According to the Cabinet Office, the revised figures incorporate newly available data on restaurant activity, gaming sales, and corporate expenditures—components that were not captured in the initial release. Nonetheless, the outlook for the current quarter is clouded by external headwinds, particularly the imposition of US tariffs, which pose a significant downside risk to export performance; domestic consumption will have to exhibit sufficient resilience to fully offset this expected drag. Moreover, growth in capital expenditure was revised down to 0.6% q/q from an initially reported 1.3%. The growth rates for exports and imports of goods & services were left unchanged at 2.0% q/q and 0.6% q/q, respectively.
China: Exports cool amid tariff uncertainty. China’s exports rose at a slower pace in August (4.4% y/y) compared to July (7.2%), missing expectations of 5%. This represents the weakest growth rate in six months, influenced in part by a high comparison base last year and the fading impact of the earlier tariff truce with the US. On August 11, both sides agreed to prolong their tariff ceasefire for an additional 90 days, maintaining the existing U.S. tariffs of 30% on Chinese products and China's 10% duties on American goods. However, they seem to be having difficulty finding a clear direction for negotiations beyond this temporary extension. Imports, meanwhile, rose by 1.3% in August, a slowdown from the 4.1% increase recorded in July and falling short of the 3.0% growth anticipated by the market. Imports remained subdued largely because of the ongoing downturn in the property market and growing concerns over job stability. Nevertheless, August’s total trade surplus reached $102 billion, surpassing market expectations and exceeding the $91 billion posted in the same month last year, as export growth continued to outstrip imports.
Saudi Arabia: GDP growth revised up to 3.9% for Q2 2025. Official data confirmed that the Saudi economy grew by 3.9% y/y in Q2 2025, accelerating from Q1’s reading (3.4%) with the second strongest quarterly growth rate in more than two years and matching the preliminary estimate. Non-oil growth was revised down slightly from 4.7% y/y in the initial estimate to a still robust 4.6%, the 18th consecutive quarter of growth, while expansion in the oil sector and government services was left unchanged at 3.8% y/y and 0.6%, respectively. The solid non-oil growth was evident across the various economic sectors, most notably in wholesale, retail trade, and hospitality (6.6% y/y), finance, insurance and real estate services (5%), construction (3.8%) and manufacturing (2.8%, excluding refining), which together comprise the majority of non-oil GDP. Looking back at the first half of the year, overall GDP growth averaged 3.6% y/y compared to 0.2% in the same period of 2024, lifted in large part by the ongoing recovery in oil sector output, which should get a further boost by the recent OPEC-8 decision to begin unwinding the second tranche of production cuts. Meanwhile, we expect non-oil sector growth to ease slightly but remain relatively strong in H2 25 on sustained private sector-led domestic demand. We forecast faster GDP growth of 3.7% in 2025 from an upwardly revised 2.0% in 2024.
UAE: Non-oil growth eases to a still robust 5.3% in Q1 2025. Preliminary official figures show non-oil GDP growth easing to a still-robust 5.3% y/y in Q1 2025 from Q4 2024’s four-quarter high of 6.2%. At the sectoral level, manufacturing (7.7% y/y), finance & insurance (7%), construction (7%) and real estate led gains (6.6%), while the wholesale and retail trade sector, the largest component of non-oil GDP at 15.6%, grew by 3.0%. The share of the non-oil sector in the real economy reached 77.3%, the highest it has ever been, partly reflecting the authorities’ success in pursuing diversification goals under the “We the UAE 2031” banner (including raising GDP to AED3 trillion by the next decade), but also by an oil sector that has seen its share of the economy reduced due to the UAE’s OPEC+ oil production cut obligations. Oil GDP declined by 0.6% y/y in Q1, down from the previous quarter’s increase of 1.5%. Total GDP growth dropped to 3.9% y/y from 5% in Q4 2024. Looking ahead, the unwinding of OPEC+ production cuts from Q2 25 onwards, of which the UAE is the biggest beneficiary after it alone secured a higher production baseline, should propel economic activity further, while non-oil growth could remain in the robust 4-5% range. The imposition of tariffs by the US on the UAE’s iron and aluminum exports clouds the trade outlook, but its impact is expected to be limited.
