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Daily Economic Update
04.08.2025Kuwait: Solid headline credit growth in June but weak business and household credit expansion. Domestic credit increased by a strong 1.2% in June, driving up YTD growth to 4.6% (6.3% y/y). However, this was nearly fully driven by credit for securities purchase and lending to banks and financial institutions while underlying growth of business and household credit was weak in June. After strong growth in the first five months of the year, business credit was flat in June, keeping YTD growth at 4.1% (5.9% y/y). A solid increase in ‘industry’ and ‘construction’ segments in June was countered by decreases in ‘oil/gas’, ‘trade’, and ‘other services’. On a YTD basis, ‘other services’ (+7.3%), ‘trade’ (+5.9%), and ‘industry’ (+4.5%) are the fastest growing segments. Household credit inched up a limited 0.1% m/m, pushing the YTD increase to 1.3% (3.5% y/y). We note that in both 2023 and 2024, household credit growth was much stronger in the second half of the year than in the first half. While credit growth has been strong so far this year (+4.6% YTD), we also note that nearly half of that was driven by credit for securities purchase and lending to banks and financial institutions. Meanwhile, resident deposits increased 0.3% in June and are up a limited 1.7% YTD (4.2% y/y). However, the growth in private-sector deposits has been much stronger at 3.4% YTD and 4.7% y/y. In contrast, government deposits have been a drag, falling by 10% YTD (-11% y/y). Within private-sector KD deposits, CASA was flat in June, but on a YTD basis (+4.2%) has slightly outstripped the increase (+3.4%) in time deposits.
Oil: OPEC-8 announces another bumper output increase for September. OPEC-8 group members agreed yesterday to carry over August’s accelerated output increase target of around 548 kb/d for September. This would conclude the unwinding on paper of the 2.2 mb/d of supply cuts from 2024 and a 300 kb/d baseline increase for the UAE a full year ahead of schedule. In practice, though, this has yet to translate into large output increases, with OPEC secondary source data showing that production from OPEC-8 rose only 542 kb/d between April and June compared to the planned increase of 958 kb/d, with countries such as Iraq, Russia, and the UAE adhering to pledged compensatory cuts even while Kazakhstan’s output continues to range above its quota. Nevertheless, the group’s plan to accelerate the pace of resupply has largely been successful, with Brent comfortably hovering around the $70/bbl mark and remaining largely unchanged in early trading today, indicating stronger-than-expected seasonal demand and the market capacity to absorb additional barrels in a year where overabundant supply was the base case. The OPEC-8 group (plus Gabon) will meet again on September 7 as the focus now shifts to the 1.66 mb/d tranche of other voluntary cuts implemented back in May 2023. The backdrop for the next meeting could revolve around escalating tensions between the US and Russia, after US President Trump shortened the 50-day deadline for Moscow to end its war with Ukraine to 10 days, i.e., August 8. Should Russia fail to secure a ceasefire, Trump has promised “secondary tariffs” on buyers of Russian oil which include China, India, and Turkey, though India seems to have been signaled out by senior US administration officials such as Bessent and Rubio. Russian oil flows to India, hovering near 1.7 mb/d, could potentially be disrupted if Trump follows through with his threats, allowing the OPEC-8 members the opportunity to unwind the next tranche of output cuts without significantly impacting prices. The news of the shortened deadline pushed oil prices higher last week, with Brent settling at $69.7/bbl on Friday to notch a 1.8% w/w gain.
Global: Potential further market reactions to US developments and BoE’s interest rate decision key matters this week. It will be interesting to see if there is further market reaction in the US this week to the firing of the BLS commissioner, and whether the investor narrative shifts to questioning the credibility of future US labor market data, given the politicization of the matter by Trump. In terms of data releases, in the US, the June balance of international trade (goods and services) is due on Tuesday, data which has recently been volatile given tariff front running. The ISM Services PMI is also due on Tuesday, and the consensus forecast is for an improvement to 51.5 in July from 50.8 in June. Initial weekly jobless claims (due on Thursday) are seen staying relatively modest at 220K (w/e Aug 2) from 218K the prior week. In the Eurozone, retail sales for June is due on Wednesday and seen increasing by 0.4% m/m following a 0.7% drop in May. In the UK, the Bank of England will announce the MPC decision on Thursday, with the market widely expecting a 25-bps policy rate cut to 4%. The bank would also provide its updated growth and inflation forecasts. The Halifax house price index (also due on Thursday) is expected to rise by a modest 0.1% m/m in July after no change in June. In China, export and import data is due on Thursday that would likely underline the impact of US tariffs and upended global trade flows. July’s CPI inflation will be out on Saturday and is seen flipping back into deflation at -0.1% y/y from +0.1% in June. Finally in Japan, household spending for June is due on Friday and is seen increasing by 2.6% y/y, down from a strong 4.7% rise in May.