UAE economy expands 3.8% in first nine months of 2024

The UAE’s economy expanded by 3.8% in the first nine months of 2024, reaching a total of AED 1.32trn. The non-oil economy expanded by 4.5% during the period while we estimate the oil sector expanded by more than 1%. On an annual basis, we estimate the economy expanded by 3.9% in Q3 compared with the same period a year earlier with the non-oil sector expanding by 4.6%. Based on activity data for Q4 2024 it would appear that there was an acceleration in activity in the final months of the year, supporting our estimate of strong non-oil activity in 2024. The pace of growth announced for Q3 is in line with our target of 3.7% growth for the year as a whole. According to a statement from WAM, the non-oil economy accounted for 74.6% of GDP in the first nine months of 2024.

The ISM services index improved in February, rising to 53.5 from 52.8 a month ago and better than market expectations of a cooling in activity. New orders, employment, export orders and supplier deliveries all improved month/month in the services index though prices remained elevated at 62.6 and actually moved higher month/month. The services index stands in contrast to the manufacturing series that was released earlier this week and flashed more red signals about the health of industry in the US.

Private sector payrolls expanded by just 77k jobs in February according to data from the ADP. That was the weakest job growth in the sector since July last year. Activity was very regionalized with the northeast and Midwest accounting for all the job gains while both the southern and western regions showed outright declines in employment. Standing at odds with the ISM indexes released this week the ADP suggests that there were more jobs added in the goods producing sectors than service producing.

US President Donald Trump has exempted cars coming from Mexico and Canada into the US from his tariffs for one month, only a few days after the tariffs came into full effect. Auto parts will also be covered as part of the exemption. Agricultural goods are also under consideration for an exemption.

Today’s Economic Data and Events

• 15:00 TU One-week repo rate: forecast 42.5%
• 17:15 ECB Deposit facility rate: forecast 2.5%
• 17:30 US Initial jobless claims Mar 1: forecast 233k

Fixed Income

Bond market activity was all about bunds yesterday as markets responded to the plans of incoming chancellor Friedrich Merz to boost spending on defence and infrastructure. Yields on 10yr bunds rose 30bps to 2.789%, pulling the rest of European bonds lower as well. French 10yr yields rose 26bps to 3.486% while gilt yields added 14bps to 4.68%.

In contrast yields moves in US Treasuries were much more muted with 10yr yields adding 3bps to 4.2785% while the 2yr UST yield added 1bps to 4.0047% at the close.

Ras Al Khaimah priced a USD 1bn 10yr sukuk at +80.

FX

The surge in German yields and tariff anxiety continued to play out in FX markets with EURUSD rising by 1.5% to 1.0789 overnight, its third day in a row of more than 1% gains. GBPUSD added 0.8% to settle at 1.2895 while USDJPY pulled lower to 148.88, down 0.6%. The US dollar has dropped for three days running against major peers and is now at its lowest level since the election of Donald Trump in November last year.

Commodity currencies also had a strong day against the greenback overnight with USDCAD down by 0.4% at 14339 while AUDUSD added 1% to 0.6335 and NZDUSD rose by 1.1% to 0.5727.

Equities

Benchmark equity indices stabilized yesterday after some heavy selling earlier in the week. The Dow Jones ticked higher by 1.1% with the S&P 500 recording similar gains and the NASDAQ rising by 1.5%. European markets were the outperformer with a 1.9% gain in the Euro Stoxx though the FTSE was muted with a flat close. German markets added almost 3.4% overnight.

Local markets closed weaker with the DFM down 0.8% overnight and the ADX closing lower by 0.4%. The Tadawul was offered by about 0.3%.

Commodities

Oil prices endured another day of selling, taking the slump for both Brent and WTI to four days in a row. Brent futures fell 2.5% to close below USD 70/b for the first time since September last year while WTI dropped 2.9% to close at USD 66.31/b. The weakness was spread across refined products as well.

Data from the EIA showed a 3.6m bbl in commercial crude inventories last week with modest draws in gasoline and distillates. Commercial crude stockpiles rose to their highest level since Q3 2024.

Industrial metals were generally stronger overnight though focus seems to still be much more on tariffs from the US than China’s activity targets. Aluminium and copper on the LME closed higher while iron ore ticked lower. Precious metals were generally bid higher overnight though palladium was an outlier in being sold.