18 January 2023
4 mins clock icon

Dubai inflation rises in December

By Khatija Haque

Dubai CPI accelerated 0.6% m/m and 5.2% y/y in December, the fastest inflation rate in three months. The main driver of price growth last month was housing and utilities, which rose 0.5% m/m (4.9% y/y) but accounts for 40% of the index. Transport costs rose 1.8% m/m and recreation and culture prices jumped 5.2% m/m. Food prices declined -0.1% m/m in December but were still up 4.2% y/y.  Average inflation for Dubai in 2022 was 4.7%, slightly higher than the 4.5% we had forecast. We expect inflation to ease to 3.5% in 2023, on slower economic growth and base effects.

Japan’s economic data has been weaker than expected ahead of today’s BoJ decision. Core machine orders fell -8.3% m/m and -3.7% y/y in November and the Tertiary Industry Index, which measures activity in the services sectors, fell -0.2% m/m in November on weaker retail trade. The Bank of Japan decided to keep policy unchanged today despite some speculation that it could further adjust or drop its yield curve control policy. 

The UK’s labour market remained tight in the three months to November, with the unemployment rate unchanged at 3.7% and average weekly earnings accelerating to 6.4% y/y from 6.2% in the three months to October. Wage growth remains strong and will keep pressure on the Bank of England to hike rates; we expect another 100bp in hikes this year. Inflation data for December is due today, and is likely to remain in double digits on the headline level.

Investor sentiment in Germany improved sharply in January, with the ZEW expectations index rising to 16.9 from -23.3 in December, well above the median forecast and the highest reading since February 2022. There is increasing optimism that a Eurozone recession this year is likely to be shallow, with a warmer than usual winter so far and with inflation having probably peaked. Bloomberg reports that ECB policy makers are considering a slower pace of rate hikes from March.

The US empire manufacturing index fell to -32.9 in January from -11.2 in December, well below the forecast. The survey of manufacturers in New York state signalled a steep contraction in the manufacturing sector at the start of this year, with new orders falling sharply on weak demand and employment growth slowing. Price pressures continue to ease however, and firms are more upbeat about the outlook for mid-2023.     

Today’s key economic data and events

  • 11:00 UK CPI (Dec) forecast 0.3% m/m and 10.5% y/y
  • 17:30 US Retail sales (Dec advance) forecast -0.9% m/m
  • 17:30 US PPI (Dec) forecast -0.1% m/m and 6.8% y/y
  • 18:15 US Industrial production (Dec) forecast -0.1% m/m

Fixed Income

  • US Treasuries oscillated overnight, starting the day on a weaker footing before worse than expected data from the Empire manufacturing index helped to start a rally later in the session. The 2yr USTs managed to hold their gains through the end of the day with yields on the 2yr down 3bps to 4.2047%. In the 10yr, losses held with yields up 4bps to 3.5476%.
  • European bonds rallied sharply on news that the European Central Bank was considering slowing down its pace of monetary tightening after its February meeting to 25bps. Yields on 10yr bunds fell 9bps to 2.082% while 10yr French bond yields fell 10bps to 2.534%. Market expectations are still for a 50bps hike at the ECB’s early February meeting.
  • High-yield and emerging market bonds closed higher yesterday as risk appetite remains and prospect of a broad slowdown in monetary tightening also helps the space.


  • News that the ECB may step down a gear in the pace of its tightening helped to sink EURUSD overnight after the pair had jumped earlier in the session. The single currency dropped 0.3% to 1.0788 and is holding ground in early trade today.
  • Another rise in wages in the UK ramped up pressure on the Bank of England to keep on hiking rates and helped to push GBPUSD higher against the dollar. The pair closed up 0.8% at 1.22886. The Japanese yen is moving more sharply in anticipation of potentially another surprise move from the Bank of Japan when it meets to set policy today. USDJPY dropped 0.4% overnight to 128.12 but is rising today.
  • Commodity currencies closed stronger against the US dollar with USDCAD down 0.1% at 1.3389 while AUDUSD added 0.5% to 0.6988 and NZDUSD gained 0.7% to 0.6425.


  • US equities were mixed on Tuesday as they returned from Monday’s holiday. The S&P 500 broke its four-day winning run as it dropped -0.2%, while the Dow Jones lost a greater 1.1%. However, the NASDAQ managed to record a 0.1% gain.
  • Earlier in the day, the UK’s FTSE 100 lost 0.1% but other European equity indices were largely positive, as the composite STOXX 600 closed up 0.4% with the DAX adding 0.4% and the CAC 0.5%.
  • Locally, the ADX added 0.1% and the DFM 0.7%. Egypt’s EGX 30 added a further 0.9% and is now up 9.5% ytd in local currency terms.


  • Oil prices pushed higher overnight with Brent futures nearing a UDS 86/b close, up 1.7%. WTI futures closed at USD 80.18/b, up 0.4% and their first close above USD 80/b since the final day of 2022. The OPEC secretary general said the producers’ alliance was “cautiously optimistic” on the outlook for the global economy this year and that it was too early for OPEC to decide if it needed to compensate for any further potential drop in Russian output.

Click here for charts and tables

Written By

Khatija Haque Head of Research & Chief Economist

There was an error during your feedback!

Your feedback is valuable to us and will help us improve.

Khatija Haque

Related Articles

Subscribe to our newsletter and stay updated on the markets

There was an error during your newsletter subscription!

Please try again to stay updated with all the latest financial news and valuable insights.

Thank you for newsletter subscription!

To stay updated with all the latest financial news and valuable insights.