09 August 2023
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Dubai economy expands in Q1

By Khatija Haque

Dubai’s real GDP growth slowed to 2.8% y/y in Q1 2023 according to a government press release. There appears to have been revisions to data in 2022 and earlier. The full GDP breakdown has not been made available yet, but the press release shows that transport and storage was the main driver of growth in Q1 2023, up 10.3% y/y on the back of rebounding international air travel. The hospitality sector grew 5.6% y/y while financial services value added grew 2.4% y/y in Q1. Full year GDP growth for 2022 was 4.4%, lower than the 5.5% we had estimated.

Consumer prices in China fell -0.3% y/y in July, the first drop in prices on an annual basis since February 2021. Prices rose by 0.2% m/m however, after several months of decline. The overall softening in prices was due to lower consumer goods prices, in particular food prices which fell -1.7% y/y last month. Services inflation accelerated to 1.2% y/y. Producer prices fell -4.4% y/y suggesting there is little price pressure in the pipeline. The statistics bureau expects prices to rebound as the economy recovers.

China’s trade data for July came in weaker than forecast with exports declining -14.5% y/y in USD terms and imports falling -12.4% y/y. The trade surplus widened to USD 80.6bn from USD 70.6bn in June. The decline in exports in recent months reflects weaker global demand, while a sluggish economic recovery at home has likely weighed on import demand, with CNY depreciation another headwind for imports.   

In the US, data from the New York Fed showed that credit card balances exceeded USD 1tn for the first time in Q2 2023. A rising share of card holders are behind on their payments and delinquency rates have returned to pre-Covid levels. Nevertheless, Fed economists said there was “little evidence of widespread financial distress for consumers” in the latest consumer debt data.

The final reading for July CPI in Germany was in line with the flash estimate at 0.3% m/m and 6.2% y/y. EU harmonized inflation was also in line with forecasts at 6.5% y/y. Transport was a key driver of inflation last month, but services inflation also remained strong on a m/m basis. Food inflation slowed to 11.0% y/y from over 20% in Q1 2023.

No key economic data today

Fixed Income

  • Poor trade numbers out of China helped to prompt a flight to havens yesterday, giving US Treasuries a boost. The 2yr UST yield dipped marginally to close at 4.7514% while the 10yr closed lower by about 7bps to 4.022%. Patrick Harker, of the Philadelphia Fed, said the Fed could be at the point where it can “be patient and hold rates steady” with his counterpart Thomas Barkin from the Richmond Fed said he didn’t have any “reason to pre-judge” data to support hiking again in September.
  • European bonds also picked up a bid overnight with yields lower across all major economies. Bund yields fell 13bps to 2.462% while gilt yields dropped 8bps to 4.377%.


  • A risk-off tone helped to push the dollar higher for a second day running. EURUSD fell 0.4% overnight to 1.0956 while GBPUSD dropped to 1.2748, down 0.3%. USDJPY also failed to get any haven relief with the pair up 0.4% to 143.38.
  • Commodity currencies all settled weaker overnight. USDCAD added 0.4% to 1.3419 while AUDUSD fell 0.4% to 0.6544 and NZDUSD dropped 0.7% to 0.6066.


  • Equity markets all floundered overnight as weak China data plays into fears of a substantial global slowdown. The Dow Jones dropped 0.5% overnight while the S&P 500 sank 0.4%. The NASDAQ showed even larger declines, down by almost 0.8% overnight. European markets were also softer the FTSE down 0.4% while the Stoxx index of European equities down 0.2%.
  • Asian markets are trading soft in early trade today with the Nikkei down 0.2% and the Shanghai Composite off by 0.4%.
  • Regional markets weren’t spared the selling. The Tadawul dropped by 0.3% while the DFM closed near unchanged. The ADX, however, recorded strong gains of almost 2%.


  • Oil prices managed to hold up fairly well amid the negativity in markets. Brent prices added almost 1% to USD 86.17/b while WTI added 1.2% to USD 82.92/b. The US EIA revised up their supply growth forecast for US oil production, taking total output to 12.8m b/d from 12.6m b/d but they also lowered their demand growth expectations for the rest of the year.
  • The API reported a build in US crude stocks of 4.1m bbl last week while both gasoline and distillate inventories were lower.

Written By

Khatija Haque Head of Research & Chief Economist

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