Private sector companies in Dubai, UAE experienced another strong improvement in business conditions lead by travel and tourism during September, according to the latest Emirates NBD Dubai Economy Tracker Index.

The seasonally adjusted Index posted 55.1 for the month, down fractionally from 55.7 in August but still well above the 50.0 no-change threshold. On average in the third quarter of 2016, the headline index signalled the fastest upturn in operating conditions across the non-oil private sector economy since Q1 2015.

September data indicated improving business conditions in all three key sectors monitored by the survey, led by a robust and accelerated upturn in travel & tourism (index at 56.7). This helped to offset a slightly slower rate of expansion in wholesale & retail (54.7), and another relatively subdued improvement in the construction sector (52.7).

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.

Khatija Haque, head of Mena Research at Emirates NBD, said: “The decline in the Dubai Economy Tracker index in September was only marginal, and overall the third quarter average indicates a faster pace of expansion compared to Q1 and Q2.

“Output and new order growth remains strong although company margins remain under pressure as firms reduced prices to secure new work. The rebound in the travel & tourism sector in September is encouraging, although it probably partly reflects the impact of the Eid holidays.”

Key findings

•    Private sector output continues to rebound from soft patch recorded at start of 2016
•    Travel & tourism registers strongest rise in activity, followed by wholesale & retail
•    Business optimism hits its highest level since June 2015

Business activity and employment

The latest upturn in private sector business conditions was driven by another sharp increase in output volumes during September, led by travel & tourism and wholesale & retail. Although the overall pace of activity growth eased slightly over the month, it remained close to July’s recent peak. Survey respondents attributed greater business activity to resilient demand patterns and the launch of new products.     

Staffing levels increased for the third month running during September, thereby signalling a continued rebound in recruitment since June. However, the rate of employment growth remained marginal and weaker than the long-run survey average. Some firms noted that a lack of pressure on operating capacity had acted as a brake on job creation at their business units.

Incoming new work and business activity expectations

New business volumes increased sharply in September, although the pace of expansion eased further from July’s recent peak. Companies reporting an upturn in new work generally cited rising consumer spending and successful marketing initiatives. A number of firms also noted that price discounting had helped to boost client demand. By sector, travel & tourism firms recorded the strongest upturn in incoming new business.

Meanwhile, private sector firms signalled a sharp improvement in confidence regarding the year-ahead business outlook. September data signalled the strongest degree of optimism since June 2015, driven by greater confidence across all key sectors monitored by the survey. This was linked to improved client spending patterns and, in some cases, new work related to Expo 2020.

Input costs and average prices charged

Cost pressures continued to moderate in September, with the rate of input price inflation slowing to its weakest since March. Softer cost inflation and intense competition for new work resulted in another drop in average prices charged by private sector companies, but the latest fall was only modest. – TradeArabia News Service