Abu Dhabi grows 3.1% in 2023

Abu Dhabi recorded real GDP growth of 3.1% in 2023 according to the preliminary estimates released by the Statistics Centre - Abu Dhabi yesterday. The growth was driven by the non-oil sector which expanded by 9.1% (down just slightly from 9.2% in 2022), offset by a weaker performance from the oil sector. While the growth figure for oil GDP was not provided by the press release, oil production in the UAE was broadly flat in 2023 compared with 2022. The strong performance of the Abu Dhabi non-oil economy continued through the close of the year, with Q4 posting non-oil growth of 10.4% y/y, leading to a headline GDP growth figure of 4.1%. Notable growth sectors last year included construction, which was up 13.1% in 2023, transportation and storage activity which was up 17.1%, and financial and insurance activities which expanded 25.5%.

The UAE central bank has revised down its growth forecast for 2024, from 5.7% previously to 4.2%, and for 2025 the forecast is for 5.2%. This will be driven by non-oil growth of 4.7% in both years, while the oil sector will expand 2.9% this year and 6.2% in 2025, according to the central bank’s projections.

The US ISM manufacturing survey picked up to a positive 50.3 in March, up from 47.8 the previous month and beating the predicted 48.3. This marked the first expansionary 50-plus reading for the survey since September 2022. New orders were also positive after a February contraction, boding well for the coming months. Less positively, the prices paid subcomponent rose to 55.8, the highest since July 2022, and the Baltimore bridge collapse could exert more upwards pressure in the coming months, as will higher oil prices. Meanwhile, the employment subcomponent was at 47.4, the sixth negative reading, indicating some potential weakness in the labour market ahead of the release of the March NFP report this Friday, with the consensus forecast for a net gain of 203,000.

Today’s Economic Data and Events

16:00 Germany CPI inflation, % y/y. Forecast: 2.2%

Fixed Income

• USTs were under pressure yesterday after the ISM survey showed an upside surprise in activity and prices paid. Yields on the 2yr rose 9bps to 4.7053%, while the 10yr yield was 11bps higher at 4.3092%. Traders pared their bets on a June rate cut from the Fed.

FX

• The expectation of higher for longer rates in the US on the back of the ISM figures bolstered the dollar, which closed up 0.5% against its basket of peers yesterday.
• All the majors lost ground against the greenback, with GBP a notable loser as it dropped 0.6% to 1.2552, while JPY continued to fall, losing 0.2% to 151.65.

Equities

• Australian, Hong Kong, and European markets were closed on Monday, but the US exchanges were open again after the long weekend. The NASDAQ closed up 0.1% but the S&P 500 lost 0.2% and the Dow Jones fell 0.6%.
• Mainland Chinese markets were open yesterday, and the Shanghai Composite rose 1.2%, the biggest gain in a month, on the back of the strong official and Caixin PMI survey results.
• Locally, the ADX added 0.2% and the DFM closed 0.4% higher.

Commodities

• Oil prices were mixed to start the week, with Brent futures falling by less than 0.1% to close at USD 87.42/b, while WTI added 0.7% to close at USD 83.71/b.
• Gold hit a new high yesterday, and while it pared some of its earlier gains it still closed up 1.0% to 2,251 and is ticking up again in early trading this morning.