Dubai’s economy grew by 4% y/y in Q1 2025 in real terms, an acceleration on an estimated 3.5% y/y growth for Q4 2024. For 2024 as a whole, Dubai’s economy is estimated to have grown by 3.2%, exactly in line with our estimates. For the Q1 print, health and social work, while accounting for just 1.5% of total GDP, grew by 26% y/y. Real estate activity expanded by almost 8%, financial services grew by nearly 6% and accommodation and hospitality expanded by 3.4%. Wholesale and retail trade, which constitutes the largest single sector of Dubai’s economy at 23% of the total, expanded by 4.5%. Transport and storage, representing 13% of total GDP, expanded by 2%.
Headline CPI inflation in Dubai accelerated to 2.9% y/y in July, up from 2.4% the previous month. This was the fastest pace since February. On a monthly basis, prices were up 0.4%, a modest acceleration on the 0.3% recorded in June. Inflation has averaged 2.7% y/y over January to July, and we are maintaining our full-year average forecast of 2.5%, with the expectation that lower oil prices through the close of the year will soften the headline inflation rate through the remainder of H2.
CPI inflation in Saudi Arabia slowed to 2.1% y/y in July, down from 2.3% the previous month and marking the slowest pace of headline annual price growth since February. On a monthly basis, prices were unchanged, compared with a 0.2% rise in June. Inflation has averaged 2.2% y/y over the first seven months of the year, and we anticipate a further slowdown through the second half. Housing remains the primary contributor to inflation in Saudi Arabia although price growth slowed to 5.6% in July from 6.5% a month earlier.
The governor of the central bank of Türkiye said that monetary policy was “absolutely not on autopilot” and that inflation expectations were still above the CBRT’s forecasts which “poses a risk to disinflation.” The central bank has now introduced inflation targets and inflation forecasts in its regular reports with a target level for end of 2025 at 24%, for 2025 at 16% and 2027 at 9%. For forecasted inflation, however, the central bank expects inflation in a range of 25—29%.
Wholesale prices in the US rose by 3.3% y/y in July and were up by 0.9% m/m, their fastest pace since June 2022. Services costs rose more than 1% on a monthly basis in July, similar to levels when inflation was near its recent peak in the US. Elements from the PPI do feed into the Fed’s preferred inflation measure of PCE which has been deviating from its 2% target in the last several prints. Markets pulled back their rate cut expectations for September though still see it as more likely than not.
Wholesale prices in India slowed more than expected in July, recording an outright drop of 0.58% y/y compared with a market call of 0.48%. There were declines across nearly all segments with primary article prices falling almost 5% while energy prices were more than 2% lower.
Industrial production in China slowed sharply in July to 5.7% year-to-date from almost 7% as of June. Retail sales also slowed down, growing by 3.7% in July from 4.8% a month earlier while year-to-date fixed asset investment dropped to 1.6% from 2.8% in the first six months.
Today’s Economic Data and Events
11:00 TU inflation expectations August
16:30 US retail sales Jul: forecast 0.6%
17:15 US industrial production Jul: forecast 0%
18:00 US University of Michigan Aug: forecast 62
Fixed Income
The hot wholesale inflation print in the US helped to shift market expectations on rate cuts with US Treasuries selling off overnight. Yields on the 2yr UST yield added almost 6bps by the close to settle at 3.7324% while the 10yr yield added 5bps to 4.2849%. Markets are still pricing in a certainty of a rate cut in September with 23bps of easing though that has come lower from more than 25bps a few days ago.
Regional credit markets had a mixed session overnight with investment grade and sovereign bonds weaker while high-yield bonds picked up. Most geographies showed lower prices overnight.
FX
Currency markets swung back to the US dollar after the wholesale prices data with EURUSD lower by nearly 0.5% at 1.1648 and USDJPY higher by 0.3% at 147.76. Both have been recovering some ground in early trade today. GBPUSD was weaker by 0.3% at 1.3532 while USDCHF closed 0.3% higher overnight at 0.8068.
Commodity currencies showed wider moves with a rise of 0.4% in USDCAD while AUDUSD fell nearly 0.8% and NZDUSD was 1% lower.
In emerging markets, USDTRY pushed higher again overnight to 40.833 while USDINR added 0.1% to 87.5587. USDEGP was near flat.
Equities
Equity markets lost ground overnight though by the close the losses were relatively muted. The major US indices all closed near unchanged. In Europe though performance was better with a 0.9% rise in the EuroStoxx index and a 0.1% gain in the FTSE 100.
In the UAE, the DFM managed to close at a neutral stance while the ADX was 0.5% lower. The Tadawul had a strong session with a 0.7% rise.
Commodities
Oil prices recovered after several days of losses. Brent futures added 1.8% to USD 66.84/b while WTI was higher by 2% to USD 63.96/b. Markets are focusing on the meetings of the US and Russian presidents in coming days and what shifts may take place in geopolitics that could impact flows of Russian oil.
Gold prices touched higher overnight with a gain of 0.2% to USD 3,356/troy oz. Industrial metals were broadly weaker overnight with aluminium, copper and iron ore prices lower.