Monthly Insights: June 2021

Regional Economics

UAE: Retail lending showed signs of recovery in April: Bank loans to the private sector declined -2.6% y/y in April, but the retail lending component jumped 1.0% m/m and 2.5% y/y, pointing to a recovery in consumer demand.

Dubai: Hotel occupancy slipped slightly in May as global travel restrictions weighed on the sector’s recovery.

Saudi Arabia: Oil production cuts weighed on Q1 21 GDP growth, offsetting the 2.9% y/y growth in non-oil GDP.  We expect non-oil sector growth to accelerate in Q2, off the low annual base before moderating in H2 21.

GCC Projects: Revving up? Q1 project spending is looking decisively healthier, especially in contrast to 2020.  The question is whether this pick-up in spending will be sustained or is otherwise a blip from a low base that will slow, as has been the case over the last few years.

Global Economics

Trade rebound impacting shipping costs: The recent spike in inflation across developed markets has been caused in part by rising shipping costs, in turn driven by a remarkable recovery in global trade in recent months. 

US macro scorecard - April: A round-up of the most widely followed monthly macro data points from the US, compared to expectations and the previous month's results.

Brighter outlook for Indian economy as pandemic recedes: The recent pick-up in pace in India’s Covid-19 vaccination programme, combined with steadily falling case numbers, is giving rise to optimism with regards to the Indian economic recovery over the coming months.

Markets

Emerging markets running out of road. As the Fed has indicated it may raise rates as early as 2023, a combination of higher borrowing costs, elevated commodity prices and still recovering economies will weigh on the outlook for EM bonds and currencies.

ECB keeps policy on hold. The European Central Bank has maintained its accommodative policy stance. We would expect as the economy continues to improve that voices calling for an end to elevated asset purchases will grow louder, supporting the Euro.

Metals reprice inflation risks. A potentially more hawkish Fed and a tempering of inflation expectations for 2022 and beyond will sap strength away from precious metals. However, still strong fundamentals should help to support industrial metals.

OPEC+ keeps quiet on H2 plans. OPEC+ producers will be enjoying the high oil prices and have so far refrained from outlining a clear production strategy for the rest of 2021. Even if they were to increase ouput in line with their original agreement oil market would still be tight in H2.

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