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OUTPUT, ORDERS DOWN

Haque ... ‘global uncertainty weighed on sentiment
and activity’

Dubai private sector business slows in February

DUBAI, March 9, 2016

Private sector companies based in Dubai signalled a deterioration in overall operating conditions as output and new orders contracted during February, according to the latest Emirates NBD Dubai Economy Tracker Index.

At 48.9, the composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy was down from 50.7 at the start of 2016 and signalled a marginal deterioration in the health of the sector.

Sub-sector data indicated that travel and tourism companies noted the fastest deterioration in business conditions. The health of the construction and wholesale and retail sectors also deteriorated, albeit at marginal rates.

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 Emirates NBD Dubai Economy Tracker reading in February highlights the challenges faced by Dubai’s external-oriented service-based economy. Uncertainty about global economic growth, volatility in financial markets and low oil prices have weighed on sentiment and activity, while tourism and retail trade has also been affected by a strong US dollar. ”

Key findings

•    First falls in Dubai private sector output and new orders since start of 2010

•    Prices charged are cut at fastest pace in survey history

•    All three monitored sub-sectors record reduced output in February


Business activity and employment

February data signalled a renewed decline in overall business activity across Dubai’s private sector. Though only modest, it was the first time that activity had fallen since January 2010. Furthermore, all three key sub-sectors noted modest declines in activity during February, led by travel & tourism companies. Anecdotal evidence generally linked reduced business activity to weaker market conditions and fewer new orders.

Dubai private sector companies raised their workforce numbers only slightly in February, as has been the case in each of the past three months. A number of monitored businesses mentioned that staff hiring had been dampened by softer growth in new work.

Incoming new work and business activity expectations

Latest survey data signalled a reduced amount of new business in Dubai’s private sector during February. Though only slight, it was the first time that new orders had declined in just over six years of data collection.

Companies that reported lower new business generally commented that an uncertain global economic outlook and falling oil prices had made clients more unwilling to commit to spending. New business fell across all three monitored sub-sectors in February and, in line with the trend for activity, travel & tourism saw the fastest reduction in new work.

Despite a gloomier overall economic picture, Dubai private sector firms expressed an improved level of optimism towards the one-year business outlook in February. The overall degree of positive sentiment remained weak in the context of historical data, the Emirates NBD report said, adding that at the sub-sector level, business confidence improved across travel & tourism and wholesale & retail.

Input costs and average prices charged

Input prices declined fractionally across Dubai’s private sector economy for the second successive month in February. Meanwhile, prices charged fell at the sharpest rate in the series history amid reports of increased competition for new work. Furthermore, all three key sub-sectors cut their prices in February, with the wholesale & retail noting the steepest rate of discounting.

The Emirates NBD Dubai Economy Tracker, produced by Markit, is based on data compiled from monthly replies to questionnaires sent to senior executives in approximately 600 private sector companies, selected to accurately represent the true structure of the Dubai economy, including manufacturing, services, construction and retail.  – TradeArabia News Service




Tags: Dubai | Emirates NBD | Private sector | February |

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