How Do You Fix A Broken Part?                                  22 September 2023

The 1,744 real estate and properties transactions totalled US$ 2.18 billion, during the week, ending 22 September 2023. The sum of transactions was 289 plots, sold for US$ 575 million, and 1,455 apartments and villas, selling for US$ 869 million. The top three transactions were all for plots of land, one in Wadi Al Safa sold for US$ 22 million, the second also in Wadi Al Safa for US$ 21 million and in Al Manara for US$ 19 million. Al Hebiah Fifth recorded the most transactions, with seventy-three sales, worth US$ 115 million, followed by fifty-four sales in Madinat Hind 4 for US$ 22 million, and twenty-eight sales in Madinat Al Mataar, valued at US$ 36 million. The top three transfers for apartments and villas were for a villa and an apartment in Palm Jumeirah, valued at US$ 19 million and US$ 12 million, with an apartment in Marsa Dubai selling for US$ 15 million. The mortgaged properties for the week reached US$ 621 million, with the highest being for a plot in Wadi Al Safa for US$ 104 million. 147 properties were granted between first-degree relatives worth US$ 137 million.

In August, the total volume of sales transactions increased 8.1% month-on-month, reaching a sum of 12,134 sales – the highest volume ever for the month of August. By the end of last month, there were 85,060 sales transactions – a 41.9% surge compared to the same period in 2022, and a 125.4% hike on that for 2021. There is no doubt that by the end of this year, average monthly transaction volumes will far exceed any previously recorded figures, since records began in 2009. Such data sees a marked increase in new launches and the outlook for the next two years is robust, with reports that all these strong figures are encouraging developers to launch new projects, with several reports that many have been sold out within months, and even some reporting that 30% of units are sold prior to launch, as demand for the foreseeable future looks promising.

As the property cycle moves higher, and with no apparent end in sight, it is time for some expats to come out with doom and die forecasts that “the end is nigh”. Nothing could be further from the truth, (at least for the time being). There is no doubt that this current cycle will run its course, but it seems highly likely that this will continue well into H1 2024, and although prices will continue to rise, they will be at a slower rate. It is a fact that supply has yet to catch up with demand, bearing in mind that there is an average three-year gap between launch and hand-over, so it will be at least H2 2024 before supply starts to return to some form of post-pandemic normality.

According to UBS Global Real Estate Bubble Index 2023, the housing market of Dubai is fairly valued, and this despite the recent price increases throughout the sector – both renting and buying. The bank’s Index saw Dubai posting the highest growth among all the twenty-five major cities, surveyed in the past four quarters, adding that prices will remain strong in the coming months as the “red-hot rental market” is offering strong returns to investors and landlords. Dubai property prices rose at the fastest rate in the year ending 30 June, in almost a decade, rising by nearly 17%, with rents coming in at a higher 22.6%. UBS also noted “real housing prices continued to increase at a double-digit rate. Given strong income growth and a red-hot rental market, with rental growth even surpassing owner-occupied price growth, we see the market as fairly valued,” and that “while Dubai is highly cyclical and prone to overdevelopment, price momentum should remain strong in the coming quarters.” The bank added that Toronto, Frankfurt, Munich, Hong Kong, Vancouver, Amsterdam, and Tel Aviv – formerly in the bubble risk zone – are now all in the overvalued territory, with Zurich and Tokyo remaining in the housing bubble risk category. Dubai has yet to reach either stage.

Although no timeline was made available, Nakheel has launched its first waterfront villa project on the Palm Jebel Ali – centred on four fronds of the island – which will offer two types of units, coral and beach villas, each of which will be available for sale in eight styles. The development will offer residents an “active lifestyle with wide walkable streets, allowing for pedestrians and cyclists to access the beach through pocketed parks”, and will feature floor-to-ceiling windows with private beaches. Several international and regional architectural firms will be involved in this initial project. On completion, Palm Jebel Ali will span a total area of 13.4 sq km, (twice the size of Palm Jumeirah), and will feature seven islands and sixteen fronds, adding about one hundred and ten km to Dubai’s coastline and will be home to some 35k families and eighty hotels and resorts.

The big developers are also playing their part in ramping up the number of new residences, with several announcing mega projects – an indicator that at the least up to the mid-term (up to 2026), the outlook for the sector is promising. Apart from Nakheel, there will be several other construction companies eying Palm Jebel Ali to invest billions of dollars for future development there. In June, Emaar Properties reported that it would be expending US$ 20 billion on its ‘The Oasis’, encompassing more than 100 million sq ft to house over 7k residential units, focusing on large mansions, with spacious plots. This month, Danube Properties has launched its fifth project YTD, and the tenth over the past nineteen months; the latest is Oceanz and is Danube’s largest development to date. Samana Developers has launched a number of projects and has a target to launch twelve projects by the year-end. Azizi Developments will also launch a Venetian-inspired waterfront project in Dubai South, as well as building the UAE’s second-tallest tower on SZR. International real estate developers are also getting in the act, with the likes of international real estate developer, Mered, UK’s LEOs Development and Switzerland’s Fortimo entering the Dubai market.

It is reported that a UAE resident has spent almost US$ 12 million to purchase a 23k sq ft plot of land on the tip of Palm Jebel Ali’s frond M; it seems that the High Net Worth Individual was given exclusive pre-sales access to the plots so he could select the one that suited him the best. This is still some way off the record price of US$ 34 million paid, earlier in the year, for a 24.5k sq ft sand plot on Jumeirah Bay Island. There is no doubt that demand for plots was higher than expected, with all the released villas and plots, on fronds M, N, O and P, (which will comprise between 109 – 165 villas), were sold out, with prices starting at US$ 5 million; delivery is slated in Q1 2027.

The latest EFG Hermes’ report confirmed what many already knew that there has been strong August growth in the Dubai property sector, with total sales 37% higher, on the year, at US$ 8.50 billion, boosted by rising demand for off-plan units; this also included off-plan sales doubling on a yearly basis to US$ 4.57 billion last month, with Dubailand and Business Bay posting strong figures. Overall, total August transactions in Dubai’s real estate market rose nearly 25% annually to US$ 12.17 billion. According to Knight Frank, Q2 residential real estate prices rose 17% on an annual basis – the tenth consecutive quarter of expansion, attributable to strong demand and robust economic growth. Although residential and office activity posted strong gains, land transactions recorded the least growth on a yearly basis. Average selling prices increased 20% on the year to US$ 608 per sq ft, as rates in the luxury segment posted impressive 37.7% growth figures, with average prices at US$ 1,054 per sq ft. In the affordable segment, prices rose 8.5% yearly, with average rates at US$ 495 per sq ft. Meanwhile, in the budget segment, prices dropped by 4.5% year-on-year, although they were up 4.4% on a monthly basis, averaging US$ 270 per sq ft.

On the rental side, EFG Hermes noted a mixed bag of returns in August. Whilst areas such as Motor City, Downtown Dubai (affordable) and Dubai Sports City posted strong annual growth, of 37.5%, 29.0% and 28.0%, for two-bedroom apartments, the flip side saw Downtown Dubai (luxury) rents down 17.6% year-on-year. In Emirates Living (The Greens) and International City, they rose 11.0% and about 14.0% respectively, for two-bedroom units.

With Dubai quickly recovering from the impact of the pandemic, the emirate’s hospitality sector has rebounded, as room inventory is expected to grow by 6.4% to top 154k by the end of the year. Over the year, Dubai’s reputation has been cemented further by becoming the most popular global destination, for the second year running, and posting the world’s highest occupancy levels during H1, at 78%. H1 international visits to Dubai rose 20% to 8.36 million passengers, the best first-half performance yet, surpassing the H1 2019 pre-pandemic figure of 8.36 million tourists. Growth in the country’s hospitality and tourism industry comes on the back of improved economic growth figures, boosted by its strong non-oil sector. A number of hotel operators are augmenting room numbers, as the UAE’s tourism sector continues to recover from the pandemic. They include Accor Group, (with brands such as Sofitel, Novotel, Pullman, Mercure, and Fairmont), Marriott International, IHG Hotels and Resorts, Hilton Worldwide, Radisson Hotels and Rotana Hotels planning to add 49.5k, 52.8k, 22.1k, 39.9k, 11.7k and 10.8k rooms to the country’s room portfolio; 70% of this total will be found in Dubai, of which 70% of that sub-total will be for luxury and upper upscale hotel segments.

Last year, flydubai posted a record annual profit of US$ 327 million – 43% higher than in Covid-hit 2021. On the back of a bumper summer, during which the number of passengers between June and mid-September was 30% higher, compared to the same period last year, topping four million on 32k flights – 22% more than in 2022 – to one hundred and twenty destinations in fifty-two countries. The airline also expects a “bumper” winter, as the UAE remains busy year-round with attractions and business events, including the Cop28 climate change summit hosted by Dubai in November. CEO, Ghaith al Ghaith, noted that “we expect this year to be better than last year, but it all depends on the second half of 2023, especially with regards to fuel prices because the increase is quite significant and hit us by surprise.” His concern is warranted, as fuel accounts for 25% of the carrier’s total costs. Another worry is the continuing disruptions in its supply chain since the Covid-19 pandemic, resulting in rising costs, delivery delays and production snags. The all-Boeing fleet operator, which was scheduled to take delivery of seventeen Boeing 737 Max 8 jets this year, has received just seven of these aircraft and expects further delays to the remaining handovers, with the carrier’s supremo commenting “if we get four, we will be lucky”.

YTD, flydubai has added eight hundred staff to bring its total workforce to 5.3k, with a further three hundred to be added in Q4. Because of the supply problems with Boeing, the airline has had to lease additional aircraft and it is no secret that it is in discussions with aircraft manufacturers for a new plane order to fulfil its fleet requirements for replacement and expansion. The carrier sees more “underserved” routes in Africa and joined a growing chorus of UAE airline executives in calling for an open sky agreement between the UAE and India,  with the CEO noting that with the recently announced Middle-East-Europe Economic Corridor partnership, featuring a multibillion-dollar rail and shipping link, “to create a corridor of trade, aviation should also be liberated – if that happens then the potential is endless. India has the highest potential in the world to attract more tourism.”

Emirates will be holding an online information session for pilots and their families on 04 October, and roadshows in Mexico City Panama City and Bogota, specifically for one hundred and eighty Airbus A380 pilots to join its direct entry captains’ programme. This programme is for technically skilled captains, with a minimum of 3k hours of recent command on Airbus fly-by-wire wide-body aircraft such as the Airbus A330, A340, A350 and A380, as well as a minimum of 7k hours of total flying time on multi-crew, multi-engine aircraft, in addition to meeting other eligibility criteria. Over the past few months, 172 new pilots joined Emirates’ three recruitment programmes – direct entry captains, accelerated command and first officers – bringing EK’s flight crew portfolio to 4.2k, including 1.5k pilots, about 40% of which have been with the carrier for more than a decade, including two, with thirty-four years of service. Emirates pilots receive a tax-free salary, accommodation, education allowance, and dental, medical and life insurance, with a basic US$ 12.1k, for an eighty-five hour month plus US$ 200 for each block hour above their monthly target. On top of that, they also get chauffeur-driven transport to and from work, laundry services, forty-two days of annual leave, confirmed business class flight tickets for annual leave, concessional cargo, discounted travel benefits for friends and family, and other perks.

The airline is also seeking to hire cabin crew, engineers, IT professionals and customer service agents at both Emirates airlines and dnata. With the carrier expecting to recover its full pre-pandemic network by mid-2024 – and with over 23% of its one hundred and sixteen A380s still grounded – the airline’s president, Tim Clark, in May, noted that “we need to get twenty to thirty in the air as soon as we can, but we will get there”.

Emirates and SriLankan Airlines have signed a reciprocal interline agreement to boost connectivity for passengers of both airlines. It will allow passengers to access new points on each other’s networks, via Colombo and Dubai, utilising a single ticket and the convenience of baggage transfers. For Emirates’ passengers, the interline network includes two new Indian destinations, Madurai and Tiruchirapally, in addition to Gan Island in the Maldives, as well as twelve other Asian destinations.

In a survey, compiled by the Airports Council International Asia-Pacific & Middle East, DXB was ranked the most connected airport in the region, with a 17% 2022 growth compared to pre-pandemic 2019. The study measures passengers’ ability to access the global air transport network, capturing both direct and indirect routes, while also factoring in the quality of the service of each connection, such as destination choice, service frequency, onward connectivity and price. The airport is connected to more than 255 destinations across 104 countries and more than ninety international airlines. Since 2019, ME total connectivity has climbed 26%, as compared to Asia Pacific where there has been a 38% decline over the same period.

For the fourth consecutive year, the latest Xinhua-Baltic international shipping centre development index report ranked Dubai fifth among the twenty most prominent international centres for commercial maritime shipping. Singapore, London, Shanghai and Hong Kong took the four leading places, with the only Arab city on the list ahead of the likes of Rotterdam, Hamburg, Athens/Piraeus, Ningbo/Zhoushan and New York/New Jersey. The three parameters used by the index were port inputs (20%), business services inputs (50%) and general environment inputs (30%). The report noted that Dubai’s “strategic location and business-oriented outlook” had fast-tracked the emirate to international maritime hub status.

It is expected that six more nations – Pakistan, South Korea, Thailand, Costa Rica, Chile and Vietnam – will be added to the country’s Comprehensive Economic Partnership Agreements, having already signed CEPAs with India, Israel, Türkiye, Indonesia, Cambodia and Georgia. One of the prime objectives of these agreements is to improve trade and investment flows, and that “these next-generation deals are cementing bilateral relationships with key economies, securing supply chains and promoting investments.” On Monday, the Ministry of Economy posted that it had also launched negotiations for a Cepa deal, with Serbia; the UAE is now the third-largest market for Serbian exports in the Middle East.

Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum posted that, last year, the UAE achieved exceptional consolidated fiscal performance with an annual growth rate of 31.8% in revenues, as well as a 6.1% hike in expenditure at US$ 1.16 billion. The Deputy Ruler of Dubai, Deputy Prime Minister and Minister of Finance, said the country also recorded a 94.5% growth in non-financial asset acquisition, a testament to the UAE’s push towards revenue diversification. Sheikh Maktoum also reiterated that the federal government remains steadfast in fulfilling the directives of the leadership by implementing innovative fiscal policies and executing transformative projects that create stronger fiscal buffers to mitigate the impact of global financial fluctuations.

In line with the US Federal Reserve maintaining its federal funds rate at between 5.25% – 5.50%, the UAE Central Bank kept rates unchanged. Its overnight deposit facility stayed at 5.4% as did the rate applicable to borrowing short-term liquidity from the regulator through all standing credit facilitiesat 50 bps above the base rate.

Last year, UAE inflation – driven by increasing energy prices, imported inflation and rising employment – was 4.8 % and, according to the Central Bank, it is expected to come in at 3.1% and 2.6% in 2023 and 2024, respectively, reflecting lower energy and food prices; on a global scale, the rate was at 8.7%, with the IMF forecasts for this year and 2024 being 6.8% and 5.2% – well above most central banks’ 2.0% target.

The federal government closed its first US-denominated sovereign bond offering in over a year, which was nearly five times oversubscribed, with strong demand from domestic, regional and international investors.  The Notes will be rated AA- by Fitch, and Aa2 by Moody’s. The ten-year, US$ 1.5 billion bond, issued with a yield of 4.917%, representing a spread of 60 bps over US Treasuries, and is a positive indicator that the country is becoming increasingly popular with both domestic, and international investors who see the country as one of the most competitive and highly advanced economies in the world. The bond will be listed on the London Stock Exchange and Nasdaq Dubai. On an allocation basis, investors from the ME, US, Europe, Asia, and UK accounted for 45%, 21%, 14%, 11% and 9% of the total, whilst banks/private banks, fund managers, pension funds and the insurance sector picked up 61%, 32%, 4% and 3% respectively.

Dubai Aerospace Enterprise has managed to source a US$ 1.6 billion multi-tranche financing package, around revolving credit facilities and term financing facilities, from twenty-six financiers; the funding comprised a combination of conventional and Islamic tranches. HSBC and J.P. Morgan acted as Joint Bookrunners and Joint Mandated Lead Arrangers. The demand saw the initial size of the initial funding more than doubling to make this the largest ever bank loan financing by DAE. The finance raised will be utilised to support the future financing needs of the business and to refinance a maturing credit facility.

The DFM opened on Monday, 22 September 2023, 56 points (1.4%) lower the previous three weeks, gained 126 points (3.1%) to close the week on 4,169, by 22 September 2023. Emaar Properties, US$ 0.01 higher the previous week, gained US$ 0.19 to close on US$ 2.11 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.69, US$ 4.73, US$ 1.55, and US$ 0.43 and closed on US$ 0.70, US$ 4.94, US$ 1.61 and US$ 0.45. On 22 September, trading was at 169 million shares, with a value of US$ 137 million, compared to 219 million shares, with a value of US$ 518 million, on 15 September 2023.

By Friday, 22 September 2023, Brent, US$ 9.90 higher (15.7%) the previous three weeks, shed US$ 0.65 (0.7%) to close on US$ 93.63. Gold, US$ 43 (2.2%) lower the previous two weeks, shed US$ 1 (0.1%) to US$ 1,945 by 22 September 2023.  

With a strategic move that sees it moving out of the cryptocurrency sector and focusing more on AI, Ant Group, backed by the influential entrepreneur Jack Ma, has divested itself of a US$ 100 million stake in A&T Capital. The Chinese fintech conglomerate’s exodus comes after A&T’s founder, Yu Jun, resigned several months ago amid allegations of workplace misconduct, triggering uncertainties about its future direction; it begs the question whether A&T Capital will opt for closure or embark on a quest to secure alternative funding sources. However, it comes at a time when there are declining VC investments taking place, with VC funding tanking – in June, there was a 23% monthly fall, with a total of just US$ 520 million raised across eighty-four funding rounds reported.

92-year old, Rupert Murdoch, has announced that his son, Lachlan, will take over his role as chairman of News Corp and Fox, ending a seven-decade career that built a global media empire encompassing iconic newspapers, tabloids, along with broadcast and cable TV. He steps down as one of the world’s most influential media executives, at a time when the conglomerate is facing a number of challenges, including the fallout from a defamation lawsuit that ended having it to settle a US$ 800 million after Fox News aired unfounded claims that Dominion Voting Systems equipment was used to rig the 2020 presidential election.  He is also one of the world’s wealthiest media executives, with a reported net worth of US$ 8.3 billion. David Folkenflik, author of “Murdoch’s World: The Last of the Old Media Empires”, noted that “he used the outlets in the U.K., Australia and the U.S. to achieve certain types of policy outcomes and particularly certain types of political results, earning favours from politicians whose able trade in for political advantage.”

Toshiba, founded in 1875, has announced that it will go private and leave the Nikkei 225 after a seventy-four history with the bourse. A consortium, led by private equity firm Japan Industrial Partners, has purchased 78.65% of its shares which allows it to complete a US$ 14 billion deal to take it private. Toshiba’s president and chief executive officer, Taro Shimada, posted that the company “will now take a major step toward a new future with a new shareholder.” Recent times have seen the conglomerate involved in one crisis after another, mainly caused by inadequate corporate governance and weak management. Eight years ago, it admitted to overstating its profits by more than a US$ 1 billion over six years and two years later, in 2017, reported that it had incurred major losses at its US nuclear power business, Westinghouse. A year later, it was forced to sell its memory chip business to avoid bankruptcy, and since then, it  has received several takeover offers, including one from UK private equity group CVC Capital Partners in 2021 which it rejected. That year, it was found to have colluded with the Japanese government  to suppress the interests of foreign investors. The same year, the Board announced plans to break up the company into three sectors, but within months changed its decision to then split the company into two units instead.

Having only acquired Missguided for US$ 25 million, after the online fashion retailer collapsed into administration, in May 2022, Frasers Group is planning to sell the clothing brand to online fashion giant Shein. The buyer, only founded in 2008, is now a mega player on the world stage of fast fashion. It seems likely that Frasers will retain its head office, whilst the Missguided brand and other intellectual property will be sold. Before its demise, the Manchester-based company had become one of the UK’s biggest online fashion players but was brought down by a trifecta of supply chain problems, rising freight costs and increasing competition from rivals. Frasers – which owns the Mike Ashley-founded Sports Direct chain – has expanded rapidly by buying brands that have fallen into trouble, including Game, Evans Cycles, Jack Wills and Sofa.com. Earlier in the year, Shein – which now has its headquarters in Singapore – was valued at US$ 66 billion.

Fashion giant H&M has become the latest UK retailer to charge shoppers who return items bought online; there is a US$ 2.45 levy for customers returning parcels either in store or online. Rival retailers such as Zara, Boohoo, Uniqlo and Next already charge for online returns. The surge in on-line shopping, particularly because of the “Covid factor”, has led to an explosion of merchandise being returned because they do not fit, not as expected or other nefarious reasons. There are also many that bulk buy online products and then return the majority of them, and this has been a real problem for companies, as it increases costs and bites into margins.

The EU has levied a US$ 400 million fine on Intel after a long-running legal battle. The European Commission imposed the fine after a court threw out an original US$ 1.13 billion penalty issued in 2009 over allegations that Intel had used illegal sales tactics to shut out smaller rival AMD. The US chip maker was accused of abusing its dominant position in the global market for x86 microprocessors, with a strategy to exclude rivals by using rebates and sales restrictions. Last year, the bloc’s General Court annulled the original decision on the grounds that that the analysis of the rebates offered did not meet legal standards; at the time, the court could not decide how the total fine could be divided up between the two offences, so left it to the EU watchdog to resolve the issue.

Whilst in the US to attend the seventy-eighth session of the United Nations General Assembly. Turkish President Recep Tayyip Erdogan met with Tesla CEO Elon Musk asking him to establish a factory in his country. Last month, Tesla was discussing the possibility of building a factory in India to manufacture low-cost electric vehicles. The EV-maker has six global factories and is building a seventh in Mexico, with the possibility of an eighth being launched by the end of the year in a yet to be announced location. By the end of last week, Tesla shares were trading 123% higher YTD, and on Saturday produced its five millionth car.

Türkiye has decided to raise key interest rates by 5.0% to 30.0% in an attempt to turn around several years of skyrocketing inflation and a dramatically weakened currency. The Monetary Policy Committee noted that it was “determined to establish the disinflation course in 2024”, reiterating that “monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved”. There is no doubt that President Recep Tayyip Erdogan has well and truly back-tracked from his long-held beliefs that ultra-low rates could curb inflation which stands at over 60%. Further rate increases are expected in Q4 and into January, before an expected pause before local elections in March 2024. However, the lira is down 31% to the greenback YTD, (whilst losing 78% of its value over the past five years), and with 9% price rises in both July and August, inflation will inevitably top 70% by the end of 2023.

Ongoing from last week’s blog, which outlined the disappearance of several high-ranking executives in China, there are reports that several executives of embattled property developer Evergrande’s wealth management unit have been detained by police in Shenzhen, southern China. Noting that “recently, public security organs took criminal compulsory measures against Du and other suspected criminals at Evergrande Financial Wealth Management Co;” police are also encouraging whistle-blowers to report any cases of suspected fraud. Evergrande Financial Wealth Management Co, a wholly owned unit of Evergrande, was established in 2015 and it seems that the firm’s insurance arm has been taken over by a newly created state-owned Haigang Life Insurance Co Ltd.

With the state having passed the Pay Transparency Law, it was only a matter of time before New York enacted a law that employers, with four or more employees, must adhere to a new regulation, mandating the inclusion of salary information or a salary range in all job postings. Employers were provided with a 270-day grace period, counting from the law’s signing date on 21 December 21, to prepare for this significant change. The specified salary range must encompass the minimum and maximum annual salary figures or hourly rates that the employer, in good faith, deems accurate at the time of posting the job vacancy. The three main aims seem to be to furnish prospective job seekers with vital salary information from the outset of the application process, to combat systemic pay disparities and to address discriminatory wage-setting and hiring practices prevalent in the job market. The law applies to agents and recruiters but does not extend to job advertisements, posted by temporary help firms, with fines starting from US$ 1k to US$ 3k.

As expected, the Federal Reserve held interest rates steady on Wednesday but noted that another rate increase can be expected before the end of 2023, and that monetary policy would be kept significantly tighter through next year. A 0.25% hike in Q4 would see overnight interest rate rising to the 5.50%-5.75% range. Interestingly, the Fed sees rates dipping only 0.50% in 2024, against their 1.0% decrease forecast in June; the rates are expected to be 5.1% and 3.9% by the end of 2024 and 2025. Meanwhile, inflation is not expected to reach its 2.0% target until 2026, with expectations of rates at 3.3%, 2.5% and 2.2% from the end of this year through to December 2025.  2023 growth forecast was higher from the initial 0.4% to 2.1%, with the unemployment rate forecast to remain steady at around 3.8% this year and rising to just 4.1% by the end of 2024. On the news, bond yields moved higher in the face of a higher-for-longer monetary policy stance, with the two-year Treasury note rising to its highest level since 2007, with shares initially weakening but the greenback moving higher. Overall, it does seem that the Fed is more confident of a soft landing, despite keeping interest rates higher for longer but continuing sticky inflation may still upset the central bank’s strategy.

In the UK, August government borrowing – the difference between spending and tax income – was higher than economists had expected, rising US$ 14.3 billion – US$ 4.3 billion higher than in August 2022, and the fourth highest August borrowing since monthly records began in 1993. However, this figure is still US$ 16.0 billion lower than the March forecast of the Office for Budget Responsibility. YTD borrowing has now reached US$ 85.5 billion, which is US$ 23.7 billion more than the comparative 2022 return. Total net debt had reached US$ 3.19 trillion by the end of August, equating to 98.8% of the UK’s GDP – the value of all the goods and services produced in the country in a year.

A report by the OECD estimates that the UK will have the highest 2023 inflation rate, at 6.7%, (adding 0.3% on its forecast earlier in the year), than any other G7 economy this year. The OECD also reduced their 2024 economic growth forecast to 0.8% due to pressure on households and businesses from higher interest rates; it sees this year’s growth at 0.3%, the second weakest among the G7.

The 6.7% August inflation rate has seen prices now rising at their slowest rate in eighteen months, and the third consecutive month of falling prices; excluding food and energy, the rate stood at 6.2%. Although cereal prices nudged higher, those for milk, cheese and vegetables all fell last month and, allied with declining air fares and accommodation costs, the overall rate of inflation moved south. However, the UK rate remains relatively high when compared to many of its peers – Germany, France, Italy and US returning 6.4%, 5.7%, 5.5% and 2.5%. The surprise dip in inflation, announced on Wednesday, left the BoE in a dilemma, whether to “twist or stick”. Prior to the news, the odds were stacked up for a rate rise, but doubt spread and, although marginally still pointing to a rise, the Monetary Committee decided against any rate hike for September, still maintaining the 5.50% to 5.75% range. Not the best of forecasters, the OECD expects prices will rise faster in the UK than any other advanced economy this year.

The ghost of Alan Joyce must still stalk the corridors of power within Qantas, despite him leaving the embattled Australian carrier earlier in the month. It does seem that it has been left to his successor, Vanessa Hudson to clear up the mess left behind. The new CEO has had to apologise to passengers for the airline’s recent performance, saying that that it had let people down and that it had been a “humbling period” for the carrier. She has also announced a number of measures to try and “fix” the airline’s issues. Apart from the public apology for a series of scandals that have damaged the airline’s reputation, she acknowledged it has been “hard to deal with” and promised to make changes to rebuild customer trust. She also commented “I know that we have let you down in many ways and for that, I am sorry,” and that “we haven’t delivered the way we should have. And we’ve often been hard to deal with”, along with “we understand why you’re frustrated and why some of you have lost trust in us.” Ms Hudson has a Herculean job ahead and has vowed to fix issues at the airline and “get back to being the national carrier that all Australians can be proud of”. How Do You Fix A Broken Part?