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Khatija Haque - Head of Research & Chief Economist
Edward Bell - Senior Director, Market Economics
Jeanne Claire Walters - Senior Economist
Published Date: 17 May 2023
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
Moodys warns on US government shutdown
BoE keep rates unchanged