17 May 2023
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Dubai inflation slows to a 14-month low

By Khatija Haque

Inflation in Dubai slowed to a 14-month low of 3.3% y/y in April, down from 4.3% y/y in March. While the high annual base was a key driver of the annual disinflation, month-on-month inflation also slowed to 0.2%. Prices for recreation and culture rose 3.2% m/m in April, followed by education (1.1% m/m) and food (1.1% m/m). Housing and utilities costs rose 0.4% m/m in April but were up 5.4% y/y. Transport costs declined -1.7% m/m and -8.5% y/y in April, helping to offset inflation in housing, services and household durables. We expect inflation in the UAE to moderate this year as last year’s surge in food and energy prices is now in the base and prices for these commodities have eased in recent months. However, housing inflation is expected to tick higher in the CPI in 2023. Overall we expect inflation in the UAE to average 3.5% this year from 4.8% in 2022.  

Data for March and April points to some easing in the UK labour market. While the 3-month change in employment rose from 169K in February to 182K in March, there was a relatively large decline in single-month March employment, which fell by 444K. Growth in the labour force more than offset the increase in employment, leaving the 3-month unemployment rate at 3.9% in March, up from 3.8% in February. The number of advertised vacancies also fell, with the 3-month average declining for the 11th consecutive month in April, although they remain above pre-pandemic levels. There was however less evidence of a cooling in average weekly earnings which rose 0.6% m/m, to leave growth in the 3 months to March relative to the same period in 2022, at 5.8%, unchanged from its value in February.   

Both the expectations and current situation indices of the German ZEW survey of economic sentiment recorded declines in May. The 6-month ahead expectations index fell sharply into negative territory, declining to -10.7 from 4.1 in April, with expectations about further ECB rate hikes weighing on the economic outlook.    

The second estimate of Eurozone Q1 GDP confirmed that the bloc grew 0.1% q/q, avoiding a technical recession after having fallen 0.1% in Q4 of 2022. At a country level, it appears that Germany fared poorly while growth was stronger in Italy and Spain. The weakness in headline GDP appears however not yet to be reflected in the labour market, with employment in the Eurozone growing by a larger than expected 0.6% q/q in Q1. 

At face value the 0.4% m/m rise in nominal US retail sales in April suggests that US consumer spending is still being supported by a robust labour market and strong wage growth. Stripping out auto and gas, the value of retail sales rose 0.6% m/m, above consensus expectations. Once adjusted for inflation, retail sales were however broadly flat on the month, and there were some signs that consumers might be starting to shift away from discretionary purchases, with clothing, electronics and sporting goods categories all falling on the month.    

US industrial production surprised on the upside in April, rising 0.5% m/m. Much of the rise is attributable to durable manufacturing which rose 1% on the month. Manufacturing was in turn buoyed by a 9.3% m/m rise in motor vehicle and parts production, which is in part likely a reflection of easing supply shortages allowing backorders to be fulfilled.   

Japan’s economy grew faster than expected in the first quarter of the year. QoQ annualized growth was 1.6% in Q1, significantly above expectations for growth of 0.8%, and was driven by higher private consumption. The better-than-expected growth is likely to fuel speculation of a pivot in central bank policy happening sooner than originally anticipated.

Today’s Economic Data and Events

  • 13:00 EC CPI (Mar) Forecast: 0.7% m/m

Fixed Income

  • US Treasuries fell overnight as retail sales data came in stronger than expected. The 2yr UST yield added 7bps to close at 4.0821% while the 10yr yield gained 3bps to 3.5339%. Also helping to push yields higher were comments from Loretta Mester, the Cleveland Fed president, who said that rates weren’t yet at a level where another hike was as probable as a cut.
  • European bond markets traded broadly weaker with bund yields up about 5bps at 2.348% and gilt yields trading at 3.8-9%, essentially unchanged.
  • Emerging market USD bonds traded softer overnight with a broad index down 0.2%. The 10yr USD Egyptian government bond pulled marginally higher while Turkey USD 10yrs also traded slightly stronger.
  • Saudi Arabia raised USD 6bn in its dual tranche sukuk issuance yesterday with a 6yr maturity priced at 80bps over UST and the 10yr at 100bps over.


  • The dollar pulled higher against peers overnight as the run up in yields drew favour for the greenback. EURUSD fell by 0.1%, giving up mid-session gains, to close at 1.0862 while GBPUSD fell by 0.3% to 1.2488. USDJPY extended its gains for a fourth day running, settling at 136.39, up 0.2%.
  • Commodity currencies also showed signs of weakening with USDCAD up 0.1% at 1.3482, AUDUSD down 0.7% at 0.6656 while NZDUSD fell by 0.2% to 0.6231.


  • US equity markets generally ended lower on Tuesday as investor concern about the debt ceiling impasse grew. The Dow Jones, the S&P 500, and the NASDAQ lost 1%, 0.6%, and 0.2% respectively.
  • European equities also generally ended the day marginally lower, weighed down by the negative ZEW survey results for Germany. The CAC lost 0.2%, while the DAX fell 0.1%. The UK’s FTSE 100 dropped 0.3%.
  • Locally the DFM fell 0.5%, while Saudi Arabia’s Tadawul closed 0.2% lower.


  • Oil prices traded with a heavy bias yesterday with Brent futures down 0.4% at USD 74.91/b and WTI falling by 0.4% to USD 70.86/b. The move reflects some softer economic data out of China where industry is failing to match the pace of reopening gains seen in services, particularly in consumption.
  • The IEA releases its monthly oil market report overnight and gave more impetus for a fundamentals-based push higher in prices, noting that demand was recovering strongly and the agency actually revised their demand expectations for 2023 higher.
  • Data from the API showed a 3.7m bbl build in US crude inventories last week though both gasoline and diesel inventories fell.

Written By

Khatija Haque Head of Research & Chief Economist

Edward Bell Head of Market Economics

Jeanne Walters Senior Economist

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Khatija Haque

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