UAE economy recorded strong growth in 2022
03 March 2023, Edward Bell – Senior Director, Market Economics, Emirates NBD
The UAE’s economy expanded by 7.6% in 2022 according to a statement from economy minister Abdulla bin Touq al Marri. No breakdown on the sources of growth have been provided for the full year but given that the UAE increased oil production substantially in line with the unwinding of OPEC+ production cuts, we estimate that the oil sector led growth last year while the non-oil economy still had a robust expansion. The UAE is planning to double the size of its economy by 2013 and Minister al Marri said it was required for GDP to expand by 7% every year.
Eurozone-wide inflation confirmed that price pressures in the bloc remained hot in February, after faster than expected price growth recorded from major economies like Germany and France. Headline CPI rose by 8.5% y/y in February, just a shade lower than the 8.6% recorded for January. High food and services costs were behind the still high CPI prices while core inflation actually accelerated, rising to 5.6% y/y from 5.3% a month earlier. Inflation pressures in the Eurozone have moved from more volatile energy prices as natural gas prices have dipped this year to the stickier services component, a dynamic which will warrant the ECB keeping an aggressive edge to its policy. Pierre Wunsch, head of Belgium’s central bank, said rates could need to get up to as much as 4% in the Eurozone to combat inflation.
US initial jobless claims for the last week of February dropped slightly to 190k from 192k a week earlier. The print was slightly below market expectations but the assessment was done during a holiday-shortened week. Continuing claims for the week earlier fell by 5k to 1.655m, below pre-pandemic norms. Non-farm payrolls for February will be released next week with markets looking for 215k of jobs to have been added last month. An assessment of labour costs for Q4 2022 was revised substantially higher, to 3.2% from 1.6% previously
The Caixin survey of Chinese services firm gave another indication of the recovery underway in China’s economy. The services PMI rose to 55 for February, up from 52.9 a month earlier. New business rose by the strongest pace since April 2021 while new orders accelerated.
Egypt will raise minimum wages for government workers in April to balance the effect of higher fuel costs announced earlier this week. Lower-paid workers will receive EGP 3,500/month while higher trained staff will earn EGP 6,000-7,000/month. Pensions will also be increased by 15%.
Turkey’s trade deficit increased to USD 12.2bn in February, up nearly 53% y/y. Total exports fell by 6.4% y/y to USD 18.6bn while imports rose by almost 11% to USD 30.8bn. Gold imports have been an increasing weight on Turkey’s trade balance with imports up 859% y/y in February to USD 4.1bn.
Today’s Economic Data and Events
09:00 IN services PMI Feb
11:00 TU CPI y/y Feb: forecast 55.7%
19:00 US ISM services index Feb: forecast 54.5
US Treasury yields continued to push higher overnight, helped by persistently robust data from the labour market. Yields on 2yr USTs closed up just shy of 1bps at 4.885% while the 10yr UST yield added 6bps to 4.0556%, closing above 4% for the first time since November last year.
European bond markets also weakened as price pressures show no material sign of abating. Yields on 10yr bunds added about 4bps to 2.741% while French 10yr yields rose 4bps to 3.227% and gilt yields also pushed higher, rising by 4bps to 3.875%.
The hot inflation data in the US failed to give the Euro much lift against the dollar overnight with markets overall showing a risk-off tone. EURUSD fell by 0.7% to 1.0597 while GBPUSD dropped by 0.7% to 1.1946. Japanese yen failed to provide any haven relief, with USDJPY adding 0.4% to 136.77.
Commodity currencies also closed weaker although USDCAD managed to hold relatively stable. The pair closed unchanged at 1.3597. AUDUSD fell by 0.5% to 0.673 while NZDUSD dropped 0.6% to 0.6218.
While European equity markets and US futures spent much of yesterday in the red there was a reversal of sentiment later in the day and equity markets were largely positive. Some dovish comments from Raphael Bostic drove the reversal and in the US, all three major benchmark indices gained with the NASDAQ adding 0.7%, the S&P 500 0.8% and the Dow Jones 1.1%. In Europe, the DAX gained 0.2% and the CAC 0.7%
Risk-off sentiment had been to the fore earlier in the day in Asia, as the Hang Seng lost 0.9% while both the Shanghai Composite and the Nikkei closed down 0.1%.
Conditions were mixed locally, with the DFM losing 0.3% while the ADX added 0.1%. In Saudi Arabia, the Tadawul closed up 0.8%.
Oil prices closed higher overnight for a third day in a row. Brent futures settled at USD 84.75/b, up 0.5%, while WTI added 0.6% to USD 78.16/b. Bullish commentary from the heads of various energy firms, including Aramco and Chevron, are providing some heft to the view that oil markets are going to run tight in H2 2023 as there is limited spare capacity in the market to match any faster than expected demand.