Friday 24 May 2019

Dubai non-oil private sector sees sharp growth in May

DUBAI, June 11, 2018

Dubai’s non-oil private sector witnessed a sharp and accelerated growth during May with output and new orders both expanding at the strongest rates since early 2015, said the latest Emirates NBD Dubai Economy Tracker.

Increases in the travel & tourism and wholesale & retail sectors were the key drivers of May’s improvement. Reflective of strong business conditions in the sector, positive sentiment was at its highest since the series began in April 2012.

The seasonally adjusted Emirates NBD Dubai Economy Tracker Index – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – scored 57.6, up from 53.9 in April. The latest figure signalled a sharp improvement that was the strongest recorded since April 2017.

Wholesale & retail led the upturn on a sector basis, with an index reading of 58.3, closely followed by travel & tourism (57.3). At 54.6, down marginally from 54.9 in April, construction was the only sector to record softer growth in May.

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 sharp rise in the Dubai Economy Tracker index supports our view that growth in Dubai will be faster this year relative to 2017, but the headline reading masks the squeeze on profit margins which is also evident in the survey data.  Firms, particularly in the wholesale & retail sector, cut prices aggressively to boost their output and new orders last month.”  

Key findings

•    Economy Tracker Index rebounds in May...
•    ...on the back of sharp and accelerated rates of output and new order growth
•    Business confidence hits a series-record high

Business activity and employment

Output across Dubai’s non-oil private sector increased at the fastest pace in 40 months during May. Business activity has risen continuously on a monthly basis since March 2016. According to anecdotal evidence, a sharp expansion in new order books which in turn was linked to promotional activities and strong client demand, led to rising output requirements in the sector.

Despite steep increases in activity and new work, firms hired additional staff at only a fractional pace in May. Many respondents indicated that employment growth was restricted due to efforts to contain costs.

Incoming new work and business activity expectations

Continuing the current phase of growth that began in March 2016, latest data signalled a further improvement in new order books. Furthermore, the rate of growth accelerated to a 39-month high amid successful promotional activities and robust demand conditions, according to panel members.

Positive sentiment towards future growth prospects reached a series-record high in May. New project wins, Expo 2020 and forecasts of robust demand underpinned business confidence.

Input costs and average prices charged

Average cost burdens faced by non-oil private sector businesses continued to rise in May. That said, the rate of input price inflation eased from April and was moderate overall.

Increased promotional activities alongside softer input cost inflation led firms to reduce their output charges, albeit at a modest pace. Notably, reports of greater competition in the construction sector led firms to reduce selling prices at a solid pace, according to anecdotal evidence. – TradeArabia News Service

Tags: Emirates NBD | Private sector | Dubai non-oil | IHS Markit |

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