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Khatija Haque - Head of Research & Chief Economist
Edward Bell - Senior Director, Market Economics
Shady Elborno - Head of Macro Strategy
Daniel Richards - MENA Economist
Published Date: 06 December 2021
The rapid spread of the Omicron variant of Covid-19 is a sting in the tail of the pandemic crisis, as countries around the world have reintroduced travel restrictions, with some shutting borders entirely. There remain significant unknowns, but initial signs are that this strain is no more deadly. Nevertheless, it could have at least a modest impact on demand.
For the moment, the US labour market continues to rebound strongly and the Federal Reserve seems to be shifting its focus more squarely onto inflation. The more uncertain demand outlook, alongside the ongoing increase in production by OPEC+, has seen oil prices fall back below USD 70/b. This will help ease inflation, but the supply chain issues may be exacerbated further by Omicron.
Omicron varian underscores fragility of the global recovery Until there is broader vaccine coverage globally, there will always be a risk of a new variant that threatens the gains the global economy has made.
Improving labour market opens the way for Fed to raise rates sooner Notwithstanding the weaker than expected November NFP number, the US labour market continues to recover and the Fed appears to be increasingly focused on inflation. We now expect two rate hikes from the Fed in 2022.
Public inflation concerns could impede growth recovery Rising public concerns about accelerating inflation could impede what has to now been robust demand growth, potentially slowing the economic recovery from the pandemic
Saudi and Egypt PMIs are a mixed bag Improving conditions in Saudi Arabia, supply chain challenges in Egypt
Dubai tourism: Expo 2020 supports the recovery Dubai’s tourism sector is recovering at a robust pace, supported a very successful start to Expo 2020 that has become a major point of attraction since it’s kick-off, and very effective Covid-19 management that has seen the number of new cases drop below 100 per day.
Egypt inflation dips in October Egypt’s urban CPI inflation print came in at 6.3% y/y in October, slightly faster than we anticipated but still lower from the 6.6% recorded the previous month. In the environment of faster price growth and tighter global monetary policy we do not expect any further rate cuts by the CBE in this cycle.
OPEC+ gives itself room on Omicron OPEC+ stuck with its plans for a gradual increase in production in January despite the risk to demand posed by the Omicron variant of Covid-19. By taking a flexible and responsive approach, OPEC+ producers could help to set a floor under any collapse by cutting production.
US macro scorecard - May
Monthly Insights - May 2022
US macro scorecard - April
US macro scorecard - March
OPEC agrees very limited increase
OPEC and allies to decide on future