Business conditions in Dubai improve, but growth momentum eases to a six-month low
Source: Emirates NBD , Author: Posted by BI-ME staff
Posted: Tue November 15, 2016 9:56 am

UAE. October data signalled a further improvement in business conditions across Dubai's private sector economy, underpinned by strong rises in output and incoming new work.

At 53.2 in October, the seasonally adjusted Emirates NBD Dubai Economy Tracker Index registered above the crucial 50.0 no-change value for the eighth month running. However, the latest reading was down from 55.1 in September and pointed to the slowest growth momentum since April.

Travel & tourism remained the best performing broad category in October (index at 54.8), followed by wholesale & retail (53.3). Meanwhile, construction companies recorded only a modest improvement in business conditions (index at 51.8), partly reflecting another subdued rise in new business intakes during October.

The headline Emirates NBD Dubai Economy Tracker Index is derived from individual diffusion indices which measure changes in output, new orders, employment, suppliers’ delivery times and stocks of purchased goods.

A reading of below 50.0 indicates that the non-oil private sector economy is generally declining; above 50.0, that it is generally expanding. A reading of 50.0 signals no change.

The survey covers the Dubai non-oil private sector economy, with additional sector data published for travel & tourism, wholesale & retail and construction.

Commenting on the Emirates NBD Dubai Economy Tracker, Khatija Haque, Head of MENA Research at Emirates NBD, said: “The softer reading for the Dubai Economy Tracker in October is consistent with what we’ve seen at national level, and comes off a strong third quarter performance. Although the headline indices are lower, output and new work growth remains strong and we remain comfortable with our forecast of 3.5% economic growth in Dubai this year.” 

Key Findings

- Sustained upturn in overall business conditions, driven by travel & tourism

- Employment levels stagnate amid weakest rise in new work for six months

- Operating margins under pressure from greater price discounting in October

Business activity and employment
Improving operating conditions reflected another strong upturn in business activity across the Dubai private sector economy in October. The rate of output growth was faster than the long-run survey average, but nonetheless eased since September to its weakest for six months.
Private sector companies in Dubai signalled that employment numbers were broadly unchanged during October. Survey respondents cited pressure on margins and more cautious staff hiring policies in general.

Incoming new work and business activity expectations
Mirroring the trend for business activity, latest data highlighted a slowdown in new order growth to its weakest for six months. Anecdotal evidence suggested that strong competition for new work had weighed on growth in October, although some firms commented that price discounting had supported sales.

Dubai private sector companies are optimistic about their growth prospects for the year ahead. The degree of confidence edged up to its strongest for 16 months, supported by improved optimism across the travel & tourism sector. 

Input costs and average prices charged
Input price inflation was only modest in October, which continued the trend seen on average in 2016 so far. Meanwhile, average prices charged by Dubai private sector firms dropped for the third month running, with the rate of discounting the fastest since February. All three key sectors recorded lower output charges in October, which was generally linked to competitive pressures and associated efforts to boost sales.

Photo Caption: Khatija Haque, Head of MENA Research at Emirates NBD



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